Preamble

The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.

PRIVATE BUSINESS.

Private Bills [Lords] (Standing Orders not previously inquired into complied with),

Mr. SPEAKER laid upon the Table Report from one of the Examiners of Petitions for Private Bills, That in the case of the following Bill, originating in the Lords, and referred on the First Reading thereof, the Standing Orders not previously inquired into, which are applicable thereto, have been complied with, namely:

Walsall Corporation Bill [Lords].

Bill to be read a Second time.

Provisional Order Bills (Standing Orders applicable thereto complied with),

Mr. SPEAKER laid upon the Table Report from one of the Examiners of Petitions for Private Bills, That in the case of the following Bill, referred on the First Reading thereof, the Standing Orders, which are applicable thereto, have been complied with, namely:

Ministry of Health Provisional Order (Brighton) Bill.

Bill to be read a Second time Tomorrow.

Reading Corporation Bill (Certified Bill),

Lords Amendments considered, pursuant to the Order of the House of 11th December, and agreed to.

Lancaster Corporation Bill [Lords],

Read the Third time, and passed, with Amendments.

Ministry of Health Provisional Orders (Kidderminster and Llanelly) Bill,

Ministry of Health Provisional Order (Hendon Rural) Bill,

Ministry of Health Provisional Orders (Goole and Oldham) Bill,

Pier and Harbour Provisional Orders (No. 2) Bill,

Read the Third time, and passed.

Oral Answers to Questions — UNEMPLOYMENT.

TRANSFERRED WORKERS (HOUSING ACCOMMODATION).

Mr. DAY: 1.
asked the Minister of Labour the number of adult males that have been transferred from distressed areas through the Employment Exchanges to the Greater London area for the 12 months ended to the last convenient date; and whether any investigations are made previous to the tranfer of these persons as to the possibility of affording adequate housing accommodation at an economic rental in the districts to which they are transferred?

The MINISTER of LABOUR (Miss Bondfield): During the 12 months ended 26th May, 1930, 5,374 men were transferred from the depressed areas to the areas of Employment Exchanges in Greater London. As regards the second part of the question, the transfer of married men is strictly related to the housing position, which is constantly watched. Lists of lodgings available at reasonable rates for single men are kept at all receiving Exchanges.

Mr. DAY: Can the right hon. Lady say whether the employment of these transferees shows any prospect of being regular?

Miss BONDFIELD: Yes, Sir.

Mr. DAY: Are inquiries made to see that the men are in somewhat in the same position when they are transferred as they were before?

Miss BONDFIELD: Up to a certain point, yes.

EXCHANGE FACILITIES, WHITTLE-LE-WOODS.

Mr. DOUGLAS HACKING: 2.
asked the Minister of Labour whether, in view of the large number of unemployed persons in the district of Whittle-le-Woods who at present have to proceed to the Chorley Employment Exchange to sign on and to draw their unemployment
benefit, she will see her way to have opened a branch Exchange at Whittle-le-Woods?

Miss BONDFIELD: I am afraid that owing to the great pressure on the staff at present it is not practicable to open another branch office for this area. Arrangements are, however, being made for short-time workers to be dealt with at their employers' premises, and this will cover the great majority of those concerned.

BETHNAL GREEN.

Major NATHAN: 6.
asked the Minister of Labour the number of unemployed persons in Bethnal Green at any convenient date in April and May, 1928, 1929 and 1930, respectively?

Miss BONDFIELD: As the reply includes a number of figures, I will, if I may, circulate a statement in the OFFICIAL REPORT.

Following is the reply:

Numbers of persons, resident in the Metropolitan Borough of Bethnal Green, on the registers of Employment Exchanges.

Date.
Number on Registers.


16th April, 1928
2,367


15th April, 1929
2,704


14th April, 1930
3,674


14th May, 1928
2,433


13th May, 1929
2,628


12th May, 1930
3,779

HACKNEY.

Captain AUSTIN HUDSON: 8.
asked the Minister of Labour the weekly total of the unemployed on the live register at the Hackney Employment Exchange at the latest available date as compared with 3rd June, 1929?

Miss BONDFIELD: At 26th May, 1930, there were 7,090 persons on the registers of the Hackney Employment Exchange as compared with 4,682 at 3rd June, 1929.

BIRMINGHAM.

Mr. LONGDEN: 9.
asked the Minister of Labour the number of Birmingham's fresh claimants for the unemployment benefit during April and May of this year; and the number who were disqualified under transitional conditions?

Miss BONDFIELD: During the period 13th March to 12th May, 1930, 39,238 fresh and renewal claims to unemployment benefit were made at Employment Exchanges in the Birmingham area and 1,355 were disallowed under transitional conditions.

Sir ARTHUR STEEL-MAITLAND: How does that number compare with the similar period for the previous year?

Miss BONDFIELD: I cannot say without notice.

Major the Marquess of TITCHFIELD: Can the right hon. Lady say at what point of unemployment the Government will resign?

DURHAM (TRANSFERRED MINERS).

Mr. HERRIOTTS: 15.
asked the Minister of Labour how many miners were transferred from the County of Durham during the 12 months ending 30th April, 1930?

Miss BONDFIELD: The statistics obtained in respect of the transference of men from depressed areas show the total numbers placed in employment in the areas to which they go, but do not distinguish separately the areas from which they have been transferred. I regret, therefore, that I am unable to give the number of miners transferred from the County of Durham.

BENEFIT DISALLOWED.

Sir A. STEEL-MAITLAND: 12.
asked the Minister of Labour the number of claims for unemployment benefit disallowed, under each cause of disqualification, and the percentage in each case to total claims, for each month of the year ending on the 31st May, 1930?

Miss BONDFIELD: As the reply includes a table of figures, I will, if I may, circulate a statement in the OFFICIAL REPORT.

Sir A. STEEL-MAITLAND: Can the Minister of Labour give me two figures; first, how far the figure for those who were disqualified as not normally insurable compares with the figure a year ago?

Miss BONDFIELD: I shall be obliged if the right hon. Member will await the publication of the statement.

Following is the statement:

Claims to Benefit disallowed in Great Britain 14th May, 1929, to 12th May, 1930.


—
Period 1929–30.


14 May to 10 June.
11 June to 8 July.
9 July to 12 Aug.
13 Aug. to 9 Sept.
10 Sept. to 14 Oct.
15 Oct. to 11 Nov.
12 Nov. to 9 Dec.
10 Dec. to 13 Jan.
14 Jan. to 10 Feb.
11 Feb. to 12 Mar.
13 March to 14 April.
15 Apl. to 12 May.


Fresh and Renewal Claims made
…
…
713,616
705,716
892,089
693,912
923,212
742,863
761,037
1,044,966
800,845
883,628
1,164,998
897,003


Grounds of Disallowance.
Disallowances by Insurance Officers and by Courts of Referees on 78 day Review.
Disallowances by Courts of Referees.


Not unable to obtain suitable employment.
Number
…
3,344
3,106
3,760
2,666
3,139
3,122
3,205
3,643
3,520
3,018
Not in operation.


Percentage of total claims made.
0.5
0.4
0.4
0.4
0.3
0.4
0.4
0.4
0.4
0.3


Failure or refusal to apply for or accept suitable employment, or failure to carry out written directions.
Number
…
Not in operation.
2,264
2,876


Percentage
0.2
0.3


Not genuinely seeking work
Number
…
23,896
23,902
26,105
21,500
18,356
12,944
12,425
13,212
12,947
8,145
Not in operation.


Percentage
3.3
3.4
2.9
3.1
2.0
1.7
1.6
1.3
1.6
0.9


Trade disputes
…
…
Number
…
401
252
36,651
21,235
3,093
1,509
963
361
719
953
—
—


Percentage
0.0
0.0
4.1
3.1
0.3
0.2
0.1
0.0
0.1
0.1


Employment lost through misconduct.
Number
…
3,932
4,289
5,135
4,569
5,929
4,270
4,440
4,723
5,069
5,488
3,534
3,756


Percentage
0.6
0.6
0.6
0.7
0.6
0.6
0.6
0.5
0.6
0.6
0.3
0.4


Employment left voluntarily without just cause.
Number
…
6,959
7,760
9,035
7,828
11,238
8,575
8,1527,372
8,463
9,082
5,804
6,313


Percentage
1.0
1.1
1.0
1.1
1.2
1.2
1.1
0.7
1.1
1.0
0.5
0.7


Not normally insurable and not seeking to obtain a livelihood by means of insurable employment.
Number
…
1,133
1,054
1,084
1,204






20,030
28,542


Percentage
0.2
0.1
0.1
0.2






1.7
3.2











11,289
10,071
8,685
9,913
9,634
8,594













1.2
1.4
1.1
1.0
1.2
1.0




Not a reasonable period of insurable employed during preceding two years.
Number
…
8,235
7,943
9,185
8,320






Not in operation.


Percentage
1.2
1.1
1.0
1.2


Other grounds
…
…
Number
…
2,390
2,325
3,110
3,207
4,200
3,328
3,373
4,337
3,838
3,810
7,182
7,381


Percentage
0.3
0.3
0.3
0.5
0.5
0.4
0.4
0.4
0.5
0.4
0.6
0.8


TOTAL
…
…
Number
…
50,290
50,631
94,065
70,529
57,244
43,819
41,243
43,561
44,190
39,090
38,814
48,868


Percentage
7.1
7.0
10.4
10.4
6.1
5.9
5.3
4.3
5.5
4.3
3.3
5.4

MANCHESTER MUNICIPAL EMPLOYMENT BUREAU.

Mr. GRAHAM WHITE: 13.
asked the Minister of Labour what is the relationship, if any, between the Manchester Municipal Employment Bureau and the Ministry of Labour?

Miss BONDFIELD: This bureau has been established by the Manchester Corporation on its own responsibility, and there is no special relationship between it and the local Employment Exchange.

Mr. WHITE: Does not the right hon. Lady rather look to municipal authorities to set an example to other employers by co-operating with the Employment Exchange?

Miss BONDFIELD: It is as far as I know within the discretion of municipal corporations to set up such a tribunal, and I do not want to discourage anything a locality may do in dealing with their local problems, but, as far as I can see, this particular form of activity is more likely to lead to confusion and dislocation of effort.

Mr. T. SMITH: Does the right hon. Lady approve of this duplication?

Miss BONDFIELD: I have already replied to that question.

WORK SCHEMES.

Sir A. STEEL-MAITLAND: 16.
asked the Minister of Labour whether all the schemes of public work on which 115,000 people are now engaged were started or sanctioned by the present Government; and, if not, how much of the employment of the 115,000 persons mentioned is given by schemes started or sanctioned under the late Government?

Miss BONDFIELD: The answer to the first part of the question is in the negative. Full information as to the second part of the question is not readily available, but of the men employed on schemes approved by the Unemployment Grants Committee about 14 per cent. are employed on work sanctioned by the late Government.

Sir A. STEEL-MAITLAND: Can the right hon. Lady prepare any figures giving an accurate estimate with regard to the whole?

Miss BONDFIELD: I will do my best, but the right hon. Gentleman knows that it is very difficult.

Sir A. STEEL-MAITLAND: 17.
asked the Minister of Labour how many persons over 50 years of age it is estimated are among the 115,000 persons officially stated to be employed on the schemes of public works started by or sanctioned by the Government?

Miss BONDFIELD: In general, in selecting men for employment on the various schemes of public works, a preference is given wherever practicable, and subject to industrial suitability, to married men or men with dependants; but I have no statistics as to the number of men thus employed who are over 50 years of age.

Sir A. STEEL-MAITLAND: Can the right hon. Lady obtain for us within a short time, say within the next fortnight, in regard to those persons to whom employment has been given, details with regard to their age groups, their sex, and their previous occupation, as that alone can be of any value as to unemployment?

Miss BONDFIELD: I think that is impossible within a fortnight.

Sir A. STEEL-MAITLAND: If I put a question to the right hon. Lady, will she be able to give me an answer within the next fortnight? I think it can be done easily from the administrative point of view.

Miss BONDFIELD: I will do my best.

EMPLOYMENT ABROAD.

Sir NICHOLAS GRATTAN-DOYLE: 19.
asked the Minister of Labour what advantage has been taken of the provision of the Unemployment Insurance Act, 1929, whereby the Acts can, in certain circumstances, be applied to employment abroad?

Miss BONDFIELD: I presume the hon. Member refers to Section 13 of the Unemployment Insurance Act, 1930. Regulations under this Section have been drafted and are under discussion with the interests concerned.

Sir N. GRATTAN-DOYLE: Does the right hon. Lady think, in view of the increasingly congested state of the labour market here, that some acceleration in the direction she has mentioned might take place?

Miss BONDFIELD: I am afraid that under this Section it can never apply.

DEPENDANTS' ALLOWANCES.

Sir N. GRATTAN-DOYLE: 20.
asked the Minister of Labour what has been the average weekly extra payment of unemployment benefit as the result of the increase of dependants' allowances to 9s.?

Miss BONDFIELD: On the information available, it is estimated that the average weekly extra payment of unemployment benefit as the result of the increase of dependants' allowances to 9s. under Section 2 (2, a) of the Unemployment Insurance Act, 1930, is approximately £44,000.

ALIENS.

Captain BULLOCK: 22.
asked the Minister of Labour whether she proposes to take any steps to ascertain the number of aliens in Great Britain who are at present in receipt of unemployment benefit?

Miss BONDFIELD: No, Sir.

RIVER TEES IMPROVEMENT (GRANT).

Mr. HERRIOTTS: 29.
asked the Minister of Labour what is the total amount of the Government grant to the River Tees Conservancy Commissioners for improvement works on the north bank of the Tees; what is the estimated total cost; and what number of men will be employed?

Miss BONDFIELD: The Unemployment Grants Committee have approved a grant of an estimated capitalised value of £90,000 in respect of improvement works on the north bank of the river Tees which are being undertaken by the Rives Tees Conservancy Commission for the relief of unemployment. The works are estimated to cost £300,856, and to provide direct employment amounting to 16,308 man months.

GOVERNMENT POLICY.

Viscount WOLMER: 48.
asked the Prime Minister which Minister will in future answer for the Government in respect of unemployment policy?

The PRIME MINISTER (Mr. Ramsay MacDonald): After Whitsuntide we shall revert to the old practice of putting questions on unemployment to the Departments
concerned; when Government policy is involved the questions should be addressed to me.

Sir KINGSLEY WOOD: What is the reason for that change?

Marquess of TITCHFIELD: Is this not a proof of the utter failure of the Government.

Sir AUSTEN CHAMBERLAIN: Do I rightly understand the right hon. Gentleman to say that if we want, at any time, a general discussion on the question of unemployment the Vote that we should ask for is that of the salary of the First Lord of the Treasury?

The PRIME MINISTER: It all depends upon whether the general discussion is going to be mainly Departmental or not, but we shall always accommodate the Opposition, and, if they tell us what they want and the time they want it, we shall put down the appropriate Vote.

AGRICULTURAL LABOURERS.

Lieut.-Commander KENWORTHY: 73.
asked the Minister of Agriculture what is the latest estimate of the number of agricultural labourers out of employment in England and Wales?

The PARLIAMENTARY SECRETARY to the MINISTRY of AGRICULTURE (Dr. Addison): My right hon. Friend has no detailed information on the subject subsequent to that contained in his speech on the Ministry's Estimates on the 12th May, when he stated that reports obtained from the Ministry's crop reporters in February last indicated that a total of between 30,000 and 40,000 agricultural workers were unemployed in that month. This estimate included both casual and regular workers, though the bulk of the unemployment was among casual workers.

Lieut.-Commander KENWORTHY: Is it a fact that most of these unemployed men are found in the arable districts?

Dr. ADDISON: Yes.

Sir N. GRATTAN-DOYLE: Have the Government any policy for dealing with this problem?

Oral Answers to Questions — IRON AND STEEL INDUSTRY (WAGES).

Mr. LOUIS SMITH: 5.
asked the Minister of Labour the wages at the
present time of rolling-mill operatives in the steel industry in this country, and in France, Germany, Belgium and Czechoslovakia?

Captain HUDSON: 14.
asked the Minister of Labour the comparative average wages in the iron and steel industry in Great Britain as compared with France and Belgium, respectively?

Miss BONDFIELD: As the reply is necessarily somewhat long, I propose to circulate it in the OFFICIAL REPORT.

Following is the reply:

The latest statistics collected by the Ministry of Labour as to the wages of workpeople in the iron and steel industry in Great Britain relate to October, 1928, and are published on page 401 of the "Ministry of Labour Gazette" for November, 1929. I am sending the hon. Member a copy of this issue of the Gazette, together with a copy of the current issue, which contains, on page 166, a summary of the results of an inquiry into wages and hours in the iron and steel industry in Germany in October, 1928.

Both in Great Britain and in Germany there have been increases in the rates of wages of some classes of workers in the iron and steel industry since October, 1928. In Great Britain, returns collected by the National Federation of Iron and Steel Manufacturers showed average weekly earnings of 62s. 4d. per head of all workpeople in March, 1930, as compared with 61s. 2d. in October, 1928. In Germany basic rates of wages have increased by varying amounts, the general average being probably about 5 per cent.

Similar statistics are not available for France, Belgium or Czechoslovakia, but I would refer the hon. Member to the statement, a copy of which I am sending to him, made on 29th May by the Prime Minister in reply to questions by the hon. Member for the Central Sheffield Division and the right hon. Member for the Epping Division, as to the intended publication of the results of an investigation into wages and conditions in Continental steel works.

Oral Answers to Questions — MINISTRY OF LABOUR.

Sir ASSHETON POWNALL: 10.
asked the Minister of Labour the total staff of her Department and what it was a year ago?

Miss BONDFIELD: The total staff of the Ministry, excluding cleaners, was 19,186 on 1st May, 1930, and 16,650 on 1st May, 1929.

Lieut.-Colonel ACLAND-TROYTE: The right hon. Lady, then, has found employment for some 3,000 people?

Oral Answers to Questions — HOURS OF INDUSTRIAL EMPLOYMENT BILL.

Mr. LOWTH: 11.
asked the Minister of Labour why clerical workers are excluded from the provisions of the Hours of Industrial Employment Bill, 1930?

Miss BONDFIELD: The Bill is based on the Washington Hours Convention which, I am advised, does not require that the hours of clerical workers should be regulated by its provisions.

Oral Answers to Questions — WOOL TEXTILE INDUSTRY (DISPUTE).

Mr. JOWETT: 18.
asked the Minister of Labour whether the Government intends to take any further action to bring about a settlement of the dispute in the woollen industry?

Miss BONDFIELD: As ray hon. Friend is aware I can take no further action without the joint consent of the parties. They know that, if there is any useful step which can be taken, my services are at their disposal.

Mr. JOWETT: Is it nothing to the Government that this great industry, built up by the skill and dexterity of generations of workers, should be allowed to drift into ruin?

Mr. HANNON: Would not this whole trouble have been obviated if Safeguarding had been in operation?

Oral Answers to Questions — TRADE BOARDS.

Mr. MANDER: 21.
asked the Minister of Labour the number of trades and employés which are covered by the trade boards at present constituted?

Miss BONDFIELD: The number of trades covered by trade boards is 40, and the number of employés may be estimated to be about 1,300,000.

Mr. MANDER: Can the right hon. Lady say how many have been added since the present Government took office?

Miss BONDFIELD: No, Sir.

Mr. MANDER: I beg to give notice that I shall raise this matter on the Adjournment to-morrow.

Oral Answers to Questions — WASHINGTON HOURS CONVENTION.

Mr. THORNE: 23.
asked the Minister of Labour whether she has any information in regard to the ratifying of the Washington Eight-Hours Convention by the Argentine Government; and, if so, whether she can state the changes made in regard to overtime of workers for Sundays and public holidays, dangerous and unhealthy occupations, and night work?

Miss BONDFIELD: According to my present information, the Argentine Government has not yet ratified the Washington Convention. I understand that an Act has been passed regarding hours of work, and that regulations putting the Act into force (with some exceptions) have recently been made. I have not sufficient information to enable me to answer the detailed points raised in the second half of the question.

Major COLFOX: When, if ever, is any progress likely to be made with the Bill for the ratification of the Washington Hours Convention?

Oral Answers to Questions — PROSECUTION AND CONVICTION, MANCHESTER (ISADORE DREAZON).

Sir K. WOOD: 30.
asked the Secretary of State for the Home Department whether he has now completed his inquiries relating to Isadore Dreazon, recently convicted at Manchester; whether he can state the various industrial disputes in which it has been ascertained that Dreazon intervened or fomented; and whether it has now been ascertained if he is a member of the executive of the Third International?

The SECRETARY of STATE for the HOME DEPARTMENT (Mr. Clynes): My inquiries in this case are not yet complete. I do not think it would be in the public interest that I should make any further statement at this stage.

Oral Answers to Questions — LOTTERY LAW.

Mr. DAY: 31.
asked the Home Secretary whether his attention has been drawn to the conviction of a printer at the Guildhall, on Tuesday, 20th May, for aiding and abetting the organisers of the Essex Sports Club eighth annual sweepstake by the printing of tickets; and will he consider the appointment of a committee to investigate the lottery law for the purpose of introducing legislation to clarify the whole position?

Mr. CLYNES: My attention had not been called to the case. I have obtained a report, and I find nothing in the facts to point to the setting up of a committee.

Mr. DAY: Can my right hon. Friend say whether in a recent case the police stated that there was no suggestion of any improper sale or conduct of a sweepstake, although the people were prose cuted?

Mr. CLYNES: I could not answer without the complete details being brought to my notice.

Mr. DAY: If I send my right hon. Friend particulars, will he consider them?

Mr. CLYNES: Certainly.

Oral Answers to Questions — LABOUR CONDITIONS, EAST LONDON.

Mr. GOULD: 32.
asked the Home Secretary whether he has now received any report respecting his investigations in certain London boroughs arising out of the report prepared by Dr. A. D. Denning; and what steps he proposes to take regarding it?

Mr. CLYNES: I have now received a report which covers 57 factories and workshops, including all classes and sizes of works, and give a detailed particulars as to the actual conditions. Its general effect is to confirm the opinion previously expressed that Dr. Denning's report gives a very exaggerated account. While poor or bad conditions were found in some half-dozen cases about one-half of the whole number are definitely reported as good and the remainder reached on the whole a satisfactory standard. Action has already been or is being taken to bring the conditions in every case into conformity with the Act, and I propose to call for a further report in due course
as to the results of this action. I also propose to communicate a copy of the report to the Joint Committee of the Industry for whom Dr. Denning's report was prepared, and shall be glad to consider any observations they may wish to make.

Mr. GOULD: Will that report be available to Members of this House?

Mr. CLYNES: I think that the report would not be of general or permanent interest, but I will consider whether it can be made available to Members.

Mr. GOULD: 57.
asked the Minister of Health whether any steps have been taken to investigate the insanitary conditions, as revealed in the report of Mr. A. D. Denning, respecting certain London boroughs; whether the medical officer of health has been consulted thereon; and what reports, if any, have been received?

The MINISTER of HEALTH (Mr. Arthur Greenwood): I assume that the report to which my hon. Friend refers is that on shoe manufacturing in the East End area which was prepared for the Federation of Boot and Shoe Manufacturers and the National Union of Boot and Shoe Operatives. I am not aware whether copies of this report have been furnished to the medical officers of health of the boroughs included in this area. The administration of the Factory and Workshop Acts is a matter for the Secretary of State for Home Affairs, and I understand that my right hon. Friend has directed certain inquiries to be made in the matter to which the report relates.

Oral Answers to Questions — SUBWAYS, LONDON.

Sir JOSEPH LAMB: 33.
asked the Home Secretary what decision has been taken by the Government upon the resolution of the London County Council passed in January to request the Government to appoint a Royal Commission to inquire into the whole London subway question?

Mr. CLYNES: The matter is still under consideration by the Departments concerned and no decision has yet been reached.

Sir J. LAMB: Can the right hon. Gentleman give any information as to when he will probably come to a decision?

Mr. CLYNES: Some five or six other Departments, besides the Home Office, are interested in the matter, but I will represent to them the desirability of hastening consideration.

Oral Answers to Questions — INDUSTRIAL DISEASES.

ANILINE FACTORY WORKERS (CANCER).

Mr. PHILIP OLIVER: 34.
asked the Home Secretary whether, and to what extent, the medical inspectorate of the factory department has been able to assist in the investigation at present being carried out by the London Cancer Hospital into the incidence of the disease of cancer of the bladder among workers in aniline factories; and whether, and to what extent, the Registrar-General has been able to supply the statistical information required for the investigation?

Mr. CLYNES: The precise manner in which the Factory Department could best assist in this investigation has been explored, and it was decided that they should co-operate more particularly in tracing, so far as is necessary and practicable, the exact occupations of persons who have died of cancer of the bladder. For this purpose, the Registrar-General is extracting information from his records, and the first return is, I understand, practically ready. As I have warned the hon. Member, the research is a complex and difficult one, and I am afraid it is impossible to forecast when we may expect any conclusive results.

SILICOSIS.

Mr. HOPKIN: 39.
asked the Home Secretary if he is aware that the late Thomas Davies, of Gorslas, Carmarthen-shire, was certified in June, 1929, by his family doctor to be suffering from silicosis and was a few weeks later declared by the medical referee not to be suffering from silicosis; that in April, 1930, the post-mortem examination showed that he died from silicosis; and that at the inquest the verdict was returned in accordance with the medical evidence, namely, that Thomas Davies died from silicosis; and if he is now prepared
to change Order 975 so as to obviate the effects of such mistakes to the miner or his dependants?

Mr. CLYNES: I have received reports on this case, and the facts appear to be as stated in the question. I am advised that, owing to the presence of the condition known as anthracosis, the diagnosis of the disease in this case would, during the workman's lifetime, be one of peculiar difficulty, and the case affords a very good illustration of the need for improved medical arrangements by the setting up of an expert medical board for the whole country, as recommended by the Departmental Committee. I am seeking to obtain the necessary powers for this purpose in the Workmen's Compensation (Silicosis) Bill which is now before this House, and which I hope will be proceeded with immediately after the Recess, and I can assure my hon. Friend that as soon as the Bill becomes law steps will be taken to establish the new medical organisation with the least possible delay.

Mr. HOPKIN: In the meantime, is it possible to alter Order 975, so that these men and their dependants may have some kind of compensation?

Mr. CLYNES: I am afraid it is not in my power, but that is an important point of detail into which I shall inquire.

Mr. MUGGERIDGE: Will my right hon. Friend include in the Bill the industrial complaint known as anthracosis?

Mr. CLYNES: That again is a detail of which I require notice.

Oral Answers to Questions — LICENSING LAW.

Mr. ARTHUR MICHAEL SAMUEL: 35.
asked the Home Secretary whether, before the issue and consideration of the report of the Licensing Commission, he can, in anticipation of the 1931 tourist season, make an interim statement about the policy of differentiation of licensing charges in so far as they affect hotels as distinguished from restaurants and bars, in view of the fact that the present basis of licence-charge assessments is holding up the building of additional hotels needed for the development of the Come-to-Britain movement?

Mr. CLYNES: I am afraid that I can make no such statement.

Mr. SAMUEL: Is the right hon. Gentleman aware that if there is no interim statement made there will be a delay of one year, during which time this country will lose its full share of the very valuable tourist traffic?

Mr. CLYNES: I cannot anticipate or interfere with the decisions of the Licensing Commission.

Sir N. GRATTAN-DOYLE: Is the right hon. Gentleman aware that owing to the present state of the licensing law high-class West End hotels are on the same basis as public houses?

Oral Answers to Questions — TRANSPORT.

ROAD WORKS (PNEUMATIC DRILLS).

Major CHURCH: 36.
asked the Home Secretary if he is aware that an effective and inexpensive silencer has been invented for adaptation to pneumatic road-drills; and whether, in the interests of the workmen using the drills and the convenience of the public, he will consider the desirability of making the use of silencers compulsory?

The MINISTER of TRANSPORT (Mr. Herbert Morrison): I have been asked to reply. I am aware of the existence of a device for reducing the noise of pneumatic road-drills, and I understand that experiments are being conducted for the purpose of improving it. I have no power to make the use of any such device compulsory.

Lieut.-Commander KENWORTHY: Will the Minister take steps also to silence other instruments of torture?

MOTOR TRAFFIC (DANGEROUS DRIVING).

Mr. D. G. SOMERVILLE: 37.
asked the Home Secretary whether any steps have yet been taken to instruct the police as to what constitutes dangerous and reckless driving of motor vehicles, respectively; and whether he will insist upon an adequate interval being allowed for such instruction before the Road Traffic Bill becomes law and the speed limit is removed for private motor vehicles?

Mr. CLYNES: I have already informed the hon. Member that I do not contemplate the issue of any circular to the police until the Bill has assumed final form, and, having regard to the publicity which the provisions in question have received, and to the experience which the police already possess in dealing with motor car offences, I see no necessity on that account alone for delaying the coming into force of these particular provisions beyond such date as general considerations of administrative requirements may indicate.

WILLINGDON BY-PASS.

Mr. EDE: 91.
asked the Minister of Transport whether he is aware that the proposed new main road to Eastbourne is designed to cut through the village of Willingdon, destroying the oldest and most beautiful part of it, and involving the compulsory acquisition of church land at present used as a school playground; that the residents are opposed to the scheme, which they claim could be modified to provide a by-pass round the village; and whether he is prepared to consider representations on the matter?

Mf. HERBERT MORRISON: I am aware of the circumstances connected with the proposed Willingdon by-pass and of the alternative proposals which have been put forward. My approval of the county council's proposals followed upon a local inquiry held last February. I am not aware that any fresh considerations have arisen, and I should deprecate any further delay in proceeding with the work. In the circumstances, I do not think that any useful purpose would be served by my hearing further representations in the matter, but I must not be taken to admit my hon. Friend's description of the effect of the scheme.

STREET ACCIDENTS.

Captain Sir WILLIAM BRASS: 92.
asked the Minister of Transport whether any map is kept in his Department showing the areas where the largest number of motor accidents occur, with a view to special steps being taken to render those areas less dangerous in the future?

Mr. HERBERT MORRISON: A map relating to the central portion of the London Traffic area, and showing the sites of all fatal street accidents during the years 1920 to 1928 inclusive, is included
as an appendix to the second report of the London Traffic Advisory Committee on Street Accidents in Greater London, issued in July, 1929, as a Stationery Office publication.

Sir W. BRASS: Would the Minister of Transport consider the advisability of having such a map not only of the London area, but of the whole country?

Mr. MORRISON: I will consider that, but I am afraid it would involve an increase in the staff of the Ministry of Transport, and I think this work would be better done and ought to be done by the local authority.

Sir W. BRASS: Would such a map not give the right hon. Gentleman an indication of the black spots and the danger spots in the country?

Mr. MORRISON: I quite agree, but, on the other hand, if we increase the staff for that purpose, I imagine we should be severely criticised by hon. Members opposite.

Oral Answers to Questions — COMMUNIST PROPAGANDA.

Captain BULLOCK: 42.
asked the Home Secretary whether he has now received any information with regard to the transfer of the Communist propaganda headquarters from Berlin to London; and, if so, what steps he proposes to take in the matter?

Mr. CLYNES: No, Sir; and from the result of my inquiries, I am not disposed to credit the rumour that this centre of activity is to be transferred to London.

Mr. SANDERS: Has my right hon. Friend any information to show whether the anti-Soviet Committee has been moved from Riga to London?

Mr. SPEAKER: That does not arise out of the original question.

Sir GEORGE PENNY: 88.
asked the Attorney-General whether his attention has been drawn to the leaflets issued by the Communist group of British soldiers enclosed in envelopes, entitled Lee's Tip for the Derby, which were recently distributed to soldiers at Aldershot inciting them to mutiny and rebellion; and whether it, is his intention to take steps against the printers, publishers, and distributors to stop these incitements to mutiny?

The SOLICITOR-GENERAL (Sir James Melville): I am not prepared with an answer to this question. I think it would be unwise in the public interest to give any answer to it.

Sir G. PENNY: I rather understood that an answer was to be given and that the case was being dealt with; and, as it was sub judice, I was not to address any further questions. I wish to ask that the Government would bring this matter to the special notice of the Secretary of State for India, in order to prevent such propaganda as this reaching India in the present inflamed state of that country.

The SOLICITOR-GENERAL: I am very sorry if there has been any misapprehension. I am sure there has been, and I do hope the hon. Gentleman will not press me further.

Oral Answers to Questions — EDUCATION.

SECONDARY EDUCATION, NORTH RIDING (ESTON AREA).

Mr. MANSFIELD: 44.
asked the President of the Board of Education if he has now considered the report of the North Riding Education Committee respecting the provision of a secondary school for the Eston area; and what action he proposes to take in the matter?

The PRESIDENT of the BOARD of EDUCATION (Sir Charles Trevelyan): I have considered this proposal and have informed the local education authority that it is approved in principle by the Board.

MILK SUPPLIES, SOMERSET.

Mr. GOULD: 49.
asked the President of the Board of Education the number of schools and scholars who are receiving a daily ration of milk during school hours in the administrative county of Somerset?

Sir C. TREVELYAN: I understand that, under the auspices of the National Milk Publicity Council, arrangements have been made for a daily supply of milk to about 60 children attending the Christ Church Infants' School at Frome. I hope that similar arrangements will shortly be made in other schools in the county.

Mr. GOULD: Is it the right hon. Gentleman's intention to call for a report as to the effect upon the health and lives of the school children?

Sir C. TREVELYAN: I have not intended in this particular instance to do so.

Mr. GOULD: Will the right hon. Gentleman consider that point?

Sir C. TREVELYAN: Yes, Sir.

RELIGIOUS INSTRUCTION.

Sir N. GRATTAN-DOYLE: 50.
asked the President of the Board of Education whether he will lay upon the Table of the House a selection of the agreed syllabuses of religious instruction used respectively in provided and non-provided schools?

Sir C. TREVELYAN: The Board do not inspect or otherwise supervise religious instruction, and syllabuses of such instruction are not submitted to them. I regret, therefore, that I am not in a position to do as the hon. Member suggests. I should perhaps explain that the so-called agreed syllabuses are prepared for use in non-provided schools, and any use that may be made of them in non-provided schools is a matter entirely within the discretion of individual bodies of managers.

Sir N. GRATTAN-DOYLE: Cannot the right hon. Gentleman indicate what measure of agreement, if any, has been arrived at? Can he give the House that information?

Sir C. TREVELYAN: No, Sir.

BOY SCOUTS AND GIRL GUIDES.

Mr. MANDER: 51.
asked the President of the Board of Education to what extent troops of boy scouts, wolf cubs, and companies of girl guides are being formed in connection with schools in different parts of the country; and whether this development will be definitely encouraged by his Department so far as possible?

Sir C. TREVELYAN: I am aware that there has been a considerable growth in the number of boy scout troops, wolf cub packs, and girl guide companies in the schools, but I have no statistical information on the matter. I shall continue to watch this development with interest, but the hon. Member will appreciate that
the Board of Education have no responsibility for such voluntary activities carried on outside school hours.

Mr. MANDER: Do I understand that, in so far as the Board of Education have any interest in this matter, they are favourable to this development?

Sir C. TREVELYAN: I have said that I am watching this development with interest.

Captain CROOKSHANK: Will the right hon. Gentleman watch this development and take particularly good care that these organisations do not become militaristic, like the poor cadets?

Mr. BROCKWAY: Will the right hon. Gentleman also encourage the extension of similar organisations in connection with the co-operative movement.

Mr. SPEAKER: I do not think that that question arises.

SCHOOL YEAR (DIVISION).

Mr. EDE: 52.
asked the President of the Board of Education how many local education authorities divide their school years in elementary schools into three terms, four terms, and a higher number than four, respectively?

Sir C. TREVELYAN: I regret that I have not sufficient information to enable me to give the numbers for which my hon. Friend asks. It is, however, the general practice of local education authorities, with very few exceptions, to divide the school year into either three or four terms.

SCHOOL ATTENDANCE BY-LAWS.

Mr. EDE: 53.
asked the President of the Board of Education how many local authorities have by-laws purporting to allow children to be exempted from school upon passing a labour examination; and whether, seing that power to operate such a by-law was withdrawn by Section 8 (1) of the Education Act, 1918, now embodied in the Education Act, 1921, he will call on such authorities to submit new by-laws from which this exemption is omitted?

Sir C. TREVELYAN: Upwards of 200 local education authorities have school attendance by-laws containing obsolete provisions for exemption upon a certificate from His Majesty's Inspector which, however, are very generally known to
have been repealed by the Education Act, 1918. I have no power to call upon authorities to submit new by-laws merely for the purpose of omitting these obsolete provisions, which do not, in fact, cause any misapprehension.

Oral Answers to Questions — TRADE AND COMMERCE.

COTTON INDUSTRY (INQUIRY).

Mr. TOUT: 45.
asked the Prime Minister if he can now state the date when the report of the committee of inquiry into the cotton trade will be completed and the approximate date of its submission to the representatives of the trade?

The PRIME MINISTER: The committee completed their report yesterday. As I explained yesterday in connection with a question put to me by the hon. Member for East Fife (Mr. Miller), about another Committee of the Economic Advisory Council, the question of publishing the report cannot be decided until His Majesty's Government have had an opportunity of considering the Committee's recommendations.

Sir W. BRASS: Have any new facts emerged as a result of this inquiry, and has any increased employment resulted therefrom?

The PRIME MINISTER: I cannot answer the first part of the question until I have read the report, which has not yet reached my hands.

Mr. A. M. SAMUEL: Is not the one great fact that emerges against Free Trade?

SHIPBUILDING ORDERS (CANADA).

Mr. HURD: 83.
asked the President of the Board of Trade if he can state, and, if not, if he will ascertain, the approximate amount of shipbuilding orders placed in British yards on Canadian account and the amount of Canadian money thus made available for British wages during the past year and five years, respectively?

The PRESIDENT of the BOARD of TRADE (Mr. William Graham): The precise information desired by the hon. Member is not available, but it may assist him to know that, according to particulars furnished to the Customs authorities, the
declared value of new ships built in the United Kingdom and exported to Canada was £8,773,988 in the five years 1925 to 1929, of which £3,845,752 related to the year 1928, and £3,883,040 to 1929. The figures for the three years 1925–27 are incomplete, since prior to 1928 vessels registered at a port in the United Kingdom merely for the purpose of delivery or transfer abroad were not normally recorded as exports.

Mr. HURD: Does that not indicate a substantial contribution on the part of Canada?

Mr. GRAHAM: There is no need for my hon. Friend to impress that upon me.

IMPORT DUTIES, SOUTH AFRICA (FOOTWEAR).

Sir GEORGE HAMILTON: 79.
asked the President of the Board of Trade if, in view of the proposal that the Government of the Union of South Africa shall place a duty of not less than 4s. per pair on imported footwear, he will say what steps he will recommend to the Geneva Tariff Conference to prevent this increase of tariff?

Mr. W. GRAHAM: I understand that His Majesty's Government in the Union of South Africa have approved a proposal to impose a minimum specific duty of 3s. 6d. per pair on women's shoes, other than rubber shoes and other than shoes whose uppers are wholly or mainly of leather or canvas. The Union Government did not participate in the Geneva negotiations.

Mr. L'ESTRANGE MALONE: May I ask whether these very important questions are going to be discussed at the Imperial Economic Conference?

Mr. GRAHAM: I could not make any statement about that at this stage.

Sir W. BRASS: May I ask whether any preference is to be given to the Mother Country?

Sir N. GRATTAN-DOYLE: Does not the right hon. Gentleman's answer indicate the futility of his proposals at Geneva in regard to a Tariff Truce?

Mr. GRAHAM: Not at all; I do not take that view of the Geneva Protocol.

IMPORT AND EXPORT RESTRICTIONS (ABOLITION).

Viscount WOLMER: 80 and 81.
asked the President of the Board of Trade (1) whether Czechoslovakia and Poland have ratified the Prohibitions Abolition Convention;
(2) whether this country is now bound by the Prohibitions Abolition Convention; and, if so, what is the earliest date by which it can be relieved of its obligations under that Convention?

Mr. W. GRAHAM: Neither Czechoslovakia nor Poland has ratified the Convention, but both Governments have asked the other signatories to consent to the prolongation till 20th June, 1930, of the period during which their ratifications may be deposited. If general agreement on this matter is reached, and if both States ratify, the Convention will continue in force, subject to certain conditions, until 1st January, 1935. Otherwise, it will be open to this country to withdraw on 30th June, 1931.

Viscount WOLMER: Do the Government propose to agree to extending the time for ratification?

Mr. GRAHAM: I do not reply to the question in that form, because everything depends upon what happens in the extended period, which will be approximately three weeks—to the 20th June.

Oral Answers to Questions — LONDON NAVAL CONFERENCE.

Captain CROOKSHANK: 47.
asked the Prime Minister whether any agreement was reached at the London Naval Conference regarding the gun-elevation of United States capital ships; and, if so, will he state its terms?

The PRIME MINISTER: I would refer to the statement made on the subject by my right hon. Friend the First Lord of the Admiralty in this House on 15th May last.

Captain CROOKSHANK: Was anything signed; and is anything to be published on the subject?

The PRIME MINISTER: It was fully explained in the speech of my right hon. Friend.

Captain CROOKSHANK: Surely, it is always better to have these things in writing—in the form of White Papers.

Oral Answers to Questions — PUBLIC HEALTH.

COVERED REFUSE CARTS.

Mr. DAY: 54.
asked the Minister of Health whether any decision has been arrived at by his Department for the adoption of covered sanitary refuse carts by local authorities; and what recommendations have been made to the local authorities with regard thereto?

Mr. GREENWOOD: On the general question of covered refuse vehicles, I would refer my hon. Friend to my reply to his question of 28th November last. If his present question relates to London, I may say that the report of the Departmental Committee on London Cleansing has now been received, and will be published as soon as possible.

Mr. DAY: Will the same system of covered carts be recommended in the provinces as well as in London?

Mr. GREENWOOD: I have not yet read the report.

Major COLFOX: Has the Minister any power to compel all carts used by day to be closed carts?

Mr. MUGGERIDGE: Is the Minister in favour of having covered dumps as well as covered carts?

Mr. GREENWOOD: I understand that that matter is dealt with in the report, which is to be published.

Mr. MUGGERIDGE: When, Sir?

REFUSE DISPOSAL.

Lieut. - Commander KENWORTHY: 60.
asked the Minister of Health whether he can announce any further steps taken or to be taken to deal with the nuisance caused by the dumping of rubbish and garbage by certain local authorities or their contractors in the open country, especially in the rural districts around London?

Mr. GREENWOOD: The report of the Departmental Committee on London Cleansing which has been considering this question has now been submitted and will be published as soon as possible.

Lieut.-Commander KENWORTHY: Can the right hon. Gentleman assure me that very active steps are being taken to deal with this terrible nuisance?

Mr. GREENWOOD: I said before that I really must see the report first.

EAST HAM ISOLATION HOSPITAL (LOAN).

Sir A. POWNALL: 63.
asked the Minister of Health whether he has recently sanctioned a loan to the East Ham Town Council for extensions to the local isolation hospital; and, if so, what was the amount sanctioned?

Mr. GREENWOOD: I sanctioned on the 19th May loans amounting to £40,663 to the East Ham Town Council for extensions to their isolation hospital.

Sir A. POWNALL: Did the council announce their intention of spending a larger sum in order that they may employ direct labour, as stated in the Press?

Mr. GREENWOOD: That is not quite correct. It is true that they intended to build it themselves at a higher cost than the tender now accepted.

Sir A. POWNALL: What does the right hon. Gentleman intend to do in regard to the defiance of the local authority as regards the amount of the loan?

Mr. GREENWOOD: I have never heard of any defiance of the local authority.

MILK (GRADING).

Dr. VERNON DAVIES: 65.
asked the Minister of Health if his attention has been drawn to the recommendation of the Council of Agriculture for England that the grades of new milk recognised under the Milk (Special Designations) Order, 1923, should be altered, namely: that certified should be altered to extra special, Grade A (TT) to special, and Grade A to standard; and, seeing that the standard milk for this country would thus be the lowest grade milk, that it is not produced from tuberculin tested cows, and that the new designations are not self-explanatory to the consumer, what action, if any, does he propose to take with regard to this recommendation?

Mr. GREENWOOD: I have received a copy of the report embodying the recommendation to which the hon. Member refers. I will consider the recommendation as well as the hon. Member's criticism, but I cannot contemplate the introduction of legislation on this subject in the immediate future.

Dr. DAVIES: Would it be necessary for the right hon. Gentleman to inform the House before he makes any change, or has he power to do it without consulting the House?

Mr. GREENWOOD: I understand that the changes required would need legislation.

Oral Answers to Questions — POOR LAW.

TASK WORK.

Sir K. WOOD: 55.
asked the Minister of Health whether he is now in a position to make a full statement of his policy as to the tasks of casuals in relation to stone-breaking and stone-shifting?

Mr. GREENWOOD: I am awaiting the report of the Departmental Committee which I appointed in September last to consider the administration of the laws relating to the relief of the casual poor. I understand the report will be made in the near future.

Sir K. WOOD: As, in the meantime, stone-breaking is going on, why does not the right hon. Gentleman take power to stop it?

Mr. T. WILLIAMS: rose—

HON. MEMBERS: Answer!

Mr. SPEAKER: It seems to me that the question has been fully answered.

RELIEF, DURHAM.

Mr. HERRIOTTS: 67.
asked the Minister of Health the number of persons receiving out-door relief in the administrative area of the county of Durham at the end of May, 1929, and the corresponding figures for May, 1930, and the cost of maintenance for the respective periods?

Mr. GREENWOOD: The average number of persons in receipt of out-door relief in the administrative county of Durham during April, 1930, the latest month for which figures are available, was 40,115, and the average weekly cost of the relief afforded in money and kind amounted to £10,944. Even when the May figures are available, it will not be possible to give corresponding figures for 1929, since the latter relate to unions, some of which extended beyond the boundaries of the administrative county.

Sir N. GRATTAN-DOYLE: Is the right hon. Gentleman aware that in certain districts in the county of Durham, notably in north-west Durham, there is an amount of poverty and unemployment greater than at the time when the Lord Mayor's Fund was in operation, and since that Fund has gone out of operation, and what action has been taken to supply the needs of these districts?

Mr. GREENWOOD: I understand that the late Government passed the Local Government Act to deal with this problem.

Oral Answers to Questions — PLAYING FIELDS (RATES).

Sir K. WOOD: 56.
asked the Minister of Health whether he proposes at an early date to introduce legislation to relieve playing fields from rate burdens?

Mr. D. G. SOMERVILLE: 62.
asked the Minister of Health whether his attention has been called to the fact that unless some attempt is made to reduce the heavy taxation now imposed upon the amateur sports grounds of the country at least 30 to 35 per cent. will be abandoned during the next 12 months; and whether he will reconsider the Government opposition to relieving such playing fields of rates?

Mr. GREENWOOD: I have seen statements as to increases in the assessments of playing fields, and I am asking the Central Valuation Committee to make some inquiries on the subject. I have the greatest sympathy with any movement which aims at the provision of playing fields for children and young persons, especially of the working-classes, and it is the policy of the Ministry of Health to encourage such provision. There may be a case in some instances for some revision of recent assessments, and this is a matter on which the Central Valuation Committee, who are concerned to promote uniformity of assessment, may be able to make recommendations. But I do not think that complete exemption, which is also claimed for a number of other worthy objects, could be justified, or is the right way of dealing with any anomalies which may be shown to exist.

Sir K. WOOD: If the right hon. Gentleman has such sympathy with the movement, why did he deal it such a grievous blow a week or two ago?

Sir J. LAMB: Why does the right hon. Gentleman propose to bring in class legislation?

Sir W. BRASS: Does the right hon. Gentleman think that only the children of the working-class should have playing fields?

Oral Answers to Questions — HOUSING (STEEL FRAMES).

Mr. L. SMITH: 58.
asked the Minister of Health if he will consider, in connection with the Housing (No. 2) Bill, the desirability of suggesting to local authorities erecting tenement structures to accommodate slum dwellers who may be dispossessed the advantage of using steel frames for such buildings, both to their own benefit and the relief of unemployment in the steel industry?

Mr. GREENWOOD: The information at present available to me hardly supports the view that, in this particular class of construction work, economy can be secured by the adoption of this suggestion, and the hon. Member will appreciate that the reduction of costs and of rents is of the first importance in dwellings of this character.

Mr. SMITH: Will the right hon. Gentleman have some investigation made in this direction, as I am told that an economy would be effected?

Mr. GREENWOOD: I am not sure that there is need for investigation. There is past experience which shows that that method was not quite successful.

Mr. A. M. SAMUEL: Why does the right hon. Gentleman say that? Is he not aware that some of these local provisions in the Building Acts are entirely obsolete?

Mr. GREENWOOD: That has nothing to do with the question. The experience of the late Government was that experiments in this respect were quite unsuccessful.

Mr. THORNE: Is it not the case that if you encourage one industry in this way, you will discourage other industries, such as brickmaking?

Mr. L. SMITH: Are we never to learn in the future anything more than we have learned in the past?

Oral Answers to Questions — YORKSHIRE WOOLLEN INDUSTRY (PROFITS).

Mr. BRACKEN: 68.
asked the Chancellor of the Exchequer whether the Board of Inland Revenue have received any information modifying the conclusions of the Hitchcock Committee with regard to the profits made by the Yorkshire woollen industry?

The CHANCELLOR of the EXCHEQUER (Mr. Philip Snowden): I must refer the hon. Member to my replies to previous questions by him on this subject, when I informed him that the statistics collected by the Inland Revenue Department do not distinguish the profits to which he refers.

Mr. BRACKEN: How does the Chancellor of the Exchequer calculate the basis of his statement that some industries in Yorkshire made a 1,000 per cent. on their turnover; had he any statistics?

Mr. SNOWDEN: That is precisely the question that the hon. Gentleman put on a former occasion. The hon. Member seems to be quite unable to frame a question which will elicit that information. When he can, I will give the information.

Mr. BRACKEN: Is not the Chancellor quite incapable of providing statistics to prove his statement?

Sir LAMING WORTHINGTON-EVANS: Does not the right hon. Gentleman welcome the opportunity of correcting the wholly incorrect and untrue statement that he made with regard to the Yorkshire woollen industry profits; can he give any single instance of a 1,000 per cent. profit on the turnover; is not that a mathematical impossibility?

Mr. SNOWDEN: That information is not asked for in the hon. Member's question. The statement which the right hon. Gentleman has made, to use his own phrase, is wholly incorrect and untrue. I told the hon. Member last week that if he would put down a question asking for information in support of the statement which I made, I would supply it, and I am prepared to supply it now.

Sir L. WORTHINGTON-EVANS: Do I understand that the Chancellor of the Exchequer is admitting that his statement
is inaccurate; if not, will he give an instance of 1,000 per cent profit on the turnover?

Mr. SNOWDEN: I made no such admission. I said that the right hon. Gentleman's description of my statement as being wholly inaccurate and untrue applied to the remarks which he has just made. My authority is this, if I may be permitted to give it. The Sub-committee on the Top-making Trade under the Standard Committee on the investigation of prices, appointed under the Profiteering Acts, reported in 1921 that in the case of five firms of woolcombers—the right hon. Gentleman asked for one—whose accounts had been investigated, the average profit in pence per pound was multiplied between 1912 and 1919 about 15 times after deduction of Excess Profits Duty. The Committee reported that their figures
represented an increase in the average profit per pound over the five firms of approximately 22 times before deduction of Excess Profits Duty, and 15 times after deduction of Excess Profits Duty, the highest increase being 55 times the pre-War profit before deduction of Excess Profits Duty and 37 times after the deduction of Excess Profits Duty, while the lowest increases were eight times before deduction, and five times after deduction.

Sir L. WORTHINGTON-EVANS: How does the right hon. Gentleman attempt to justify his statement that it was 1,000 per cent. on the turnover?

Mr. SNOWDEN: If the right hon. Gentleman will make a calculation, he will see that an increase of 22 times, an increase on their turnover—

Sir L. WORTHINGTON-EVANS: It does not say so.

Mr. SNOWDEN: The right hon. Gentleman seems to be assuming that I said upon the turnover of their capital.

Sir L. WORTHINGTON-EVANS: On their turnover.

Mr. SNOWDEN: Yes, turnover on their production, and that is the very basis of this statement. It represented an increase, they say, in average profit per pound—that is per pound turnover—[HON. MEMBERS: "No!"]—but I am certainly not going to quibble with hon. Members.

Several HON. MEMBERS: rose—

Mr. SPEAKER: Mr. Brockway.

Mr. CHURCHILL: rose—

HON. MEMBERS: Order!

Mr. BROCKWAY: On a point of Order. May I ask whether you called me?

Mr. SPEAKER: Yes.

Mr. BROCKWAY: May I ask, in view of the profits which have been made in the woollen industry, whether the Government cannot do something to prevent wages being driven down to starvation level?

Mr. SPEAKER: That has nothing to do with this question.

Mr. CHURCHILL: May I ask the Chancellor of the Exchequer—

Lieut.-Commander KENWORTHY: On a point of Order.

HON. MEMBERS: Sit down!

Lieut.-Commander KENWORTHY: : This is a point of Order. May I draw your attention, very respectfully, to the fact that you have endeavoured to limit supplementary questions on other occasions, and may I ask whether there is a difference between the rights of hon. Members and right hon. Members?

Mr. SPEAKER: The hon. and gallant Member must allow me to be the judge of this matter.

Mr. CHURCHILL: May I be allowed to ask the Chancellor of the Exchequer whether it would not have simplified matters very much if he had said, quite frankly, that he used the word "turnover" when he meant the word "profit"?

Mr. SNOWDEN: What I said was perfectly true. As a matter of fact, I was using the identical words of this report:
It represented an increase in the average profit per pound
of 22 times—and the other figures I have given. Those were the very words.

Oral Answers to Questions — REPARATION LOAN.

Mr. HAMMERSLEY: 69.
asked the Chancellor of the Exchequer if he has
any information whether the bonds of the German reparations loan to be issued in this market or any other market will be exempt from taxation; and, if so, will he give details?

Mr. P. SNOWDEN: The bonds issued in London will not be exempt from taxation. I understand that the bonds issued in Paris will probably be exempt from certain French taxes, but I have no details. I have no information as to whether any of the other Governments, in whose markets it is proposed to issue bonds, intend to grant any exemption from taxation on those bonds.

Sir W. BRASS: Can the right hon. Gentleman say whether they will be exempt from taxation if held by residents abroad?

Mr. SNOWDEN: No.

Oral Answers to Questions — SILVER COINAGE.

Sir CHARLES OMAN: 71.
asked the Chancellor of the Exchequer whether, considering that the price of silver has now fallen to 1s. 5d. per ounce, about one-fifth of its price in 1920, and that no appreciable profit can be made by selling worn Victorian and Edwardian silver currency as bullion, he will consider the advisability of recoining the withdrawn currency at the old rate of purity abandoned 10 years ago?

Mr. P. SNOWDEN: I do not feel able to adopt this suggestion.

Sir C. OMAN: Is the right hon. Gentleman not having to spend a great deal of money on mixing pure silver with alloy in the new coins, owing to technical difficulties, while by melting down what is coming in to him of the old right ancient standard coinage of before 1920 he would not have to perform these chemical operations at all?

Mr. SNOWDEN: The advice of the practical men at the Mint does not agree with the views of the hon. Member.

Oral Answers to Questions — GOVERNMENT POLICY (ECONOMIC DEVELOPMENT).

Mr. FRANK OWEN: 72.
asked the Chancellor of the Exchequer whether, in view of the increased sum payable to the Treasury as dividend on the Treasury's
holding of shares in the Anglo-Persian Oil Company, he will consider sanctioning the application of an equivalent sum for suitable measures of national development in view of aggravated unemployment; and, in this connection, whether his attention has been drawn to the Disarmament Committee under the Civil Lord of the Admiralty or to the relative British inferiority on the North Atlantic routes in fast-mail-carrying liners and the state of the Clyde and Tyne yards?

Mr. P. SNOWDEN: It is the normal experience that a favourable out-turn under some heads of revenue is required to meet shortfalls in others. The Government have already contributed to large and numerous schemes of economic national development. Their policy has been, and will continue to be, governed by wider considerations than the yield of a single item of income in the Budget.

Major COLVILLE: Does the right hon. Gentleman object to the profits made by this company also?

Mr. SNOWDEN: I should welcome similar profits from State participation.

Mr. OWEN: May I have an answer to the second part of my question?

Mr. SNOWDEN: I do not think that really comes within the province of my Department. I think that would be more appropriately addressed to the Admiralty.

Mr. OWEN: May I ask for your ruling on this question, Sir? This question was accepted at the Table.

Mr. SPEAKER: The hon. Member had better put down another question to the other Department.

Oral Answers to Questions — AGRICULTURE.

FERTILISERS AND FEEDING STUFFS.

Mr. FREEMAN: 74.
asked the Minister of Agriculture whether he will introduce legislation restoring the powers of local authorities to take criminal proceedings in respect of adulterated samples on the premises of the purchaser under the Fertilisers and Feeding Stuffs Act, 1926, in view of the fact that the present civil remedies have proved ineffective and afford inadequate protection to farmers?

Dr. ADDISON: The Departmental Committee on whose recommendations
the Act was based was unanimous in recommending that there should be no criminal proceedings in respect of samples taken on the premises of the purchaser. Any case of fraudulent mismarking can be dealt with effectively under the Act, and the answer to the question is therefore in the negative.

Mr. L. SMITH: Does not the right hon. Gentleman consider that the very small number of cases coming under his notice proves the efficiency of this Act?

EGGS (SALE).

Mr. CHRISTIE: 76.
asked the Minister of Agriculture if he is now prepared to give effect to the recommendation of the National Farmers' Union that the sale of eggs to the consumer shall be only by weight or grade?

Dr. ADDISON: The whole question of the sale of eggs upon a weight or grade basis is receiving careful consideration in conjunction with the various interests concerned. It is hoped that proposals will emerge that will command a wide measure of general support.

Mr. ERNEST BROWN: Does the question of age also come into the consideration?

POLITICAL PARTIES (CONFERENCE).

Mr. LLOYD GEORGE: (by Private Notice) asked the Prime Minister what steps he has taken to implement the promise he gave that he would invite the Leaders of the two Opposition parties to enter into conference with the Government on the question of agriculture, and what response he has had to his invitation?

The PRIME MINISTER: I have communicated with the Leaders of the two Opposition parties. The Leader of the Conservative Opposition has replied yesterday asking for some further information on certain points. This information I will send him as soon as possible. I have received the reply of the right hon. Gentleman himself, and this is favourable.

Mr. BRACKEN: Does not the Prime Minister think that the best possible means of co-operation would be to
appoint the right hon. Gentleman Minister of Agriculture?

Oral Answers to Questions — COMPANIES ACT.

Lieut.-Colonel HENEAGE: 78.
asked the President of the Board of Trade whether he will consider the advisability of so amending the Companies Act of 1929 that no transfer deed respecting the purchase or sale of securities of a limited company shall be stamped by the Inland Revenue Department for transfer duty unless and until the stamping authorities have received notification from the Registrar that the company whose securities are to be transferred has filed annual accounts and balance sheets as required by the Act?

Mr. W. GRAHAM: I have noted the suggestion for investigation when the desirability of amending legislation is being considered.

Oral Answers to Questions — AFFORESTATION.

Lieut.-Commander KENWORTHY: 84.
asked the Parliamentary Secretary to the Board of Trade, as representing the Forestry Commissioners, what increase in the labour employed in afforestation there has been during the last 12 months; and what has been the largest number of persons employed at one time during that period?

The PARLIAMENTARY SECRETARY to the BOARD of TRADE (Mr. W. R. Smith): The number of persons employed in afforestation by the Forestry Commissioners is 165 more than 12 months ago. The largest number employed at one time during that period was 3,835.

Oral Answers to Questions — LAND REGISTRY.

Mr. MELLER: 85.
asked the Attorney-General what action has been taken within the past 12 months to acquaint county councils and county borough councils that there is provision for the voluntary inclusion, before 1st January, 1936, of areas for registration of property at His Majesty's Land Registry on the initiative of public bodies; and will he, at an early date, bring the provision to the notice of local authorities?

Sir RENNELL RODD: 86.
asked the Attorney-General whether he will
circularise county councils and county borough councils for the purpose of ascertaining if any of them desire to come into the scheme of compulsory areas of registration at His Majesty's Land Registry, so that the work of the Land Registry may broaden out and become more efficacious at a date earlier than 1936?

The SOLICITOR-GENERAL: No steps have been taken within the last 12 months to bring the matter to the attention of county and county borough councils, and I do not think that any such steps would serve a useful purpose. I see no reason to think that local authorities are not fully aware of their powers in this respect.

Oral Answers to Questions — POST OFFICE.

PRESS TELEGRAMS (BUENOS AYRES).

Captain HUDSON: 89.
asked the Postmaster-General whether he is aware that Press telegrams can be sent to Buenos Ayres at a cheaper rate via New York than by the direct route; and whether he has made any representations to the Imperial Communications Advisory Committee on this matter?

The ASSISTANT POSTMASTER-GENERAL (Mr. Viant): It is true that Press telegrams can be sent from this country to Buenos Ayres at a cheaper rate via New York than if sent by the direct route of the Imperial and International Communications Company. My hon. Friend has no responsibility in the matter but he has communicated with the Imperial Communications Advisory Committee who have certain functions in regard to the company's rates.

Oral Answers to Questions — BRITISH BROADCASTING CORPORATION (CHAIRMAN).

Captain CROOKSHANK: 90.
asked the Postmaster-General what salary will be paid to the new chairman of the British Broadcasting Corporation?

Mr. VIANT: In accordance with the terms of the Royal Charter of the British Broadcasting Corporation, the salary of the chairman is determined by resolution of the corporation subject to a maximum of £3,000 a year.

Captain CROOKSHANK: Does that mean that the corporation has it entirely
within its competence to decide when the holder of the office has already a pension?

Mr. VIANT: I think that question had better be put down.

Oral Answers to Questions — CHANNEL TUNNEL (GOVERNMENT DECISION).

Sir A. CHAMBERLAIN: May I, on behalf of my right hon. Friend the Leader of the Opposition, ask the Prime Minister whether he is now in a position to make any statement as to the position of the Government on the question of the construction of the Channel Tunnel?

The PRIME MINISTER: I intended to make a statement to-day, and it has been prepared, but, after reading it over, I found it so long that it could not very conveniently be given in reply to a question, and it occurred to me that it would suit the convenience of the House much better if I circulated it in the form of a White Paper. It is now in the printers' hands, and I think it will be circulated to-morrow. I may say that the decision of the Government will be found to be against the tunnel.

Colonel ASHLEY: Will the House be given an opportunity of discussing this question?

The PRIME MINISTER: I said yesterday that communications will be made on that subject through the usual channel.

Mr. CHURCHILL: I suppose the House may take it that this announcement by the right hon. Gentleman of the views which the Government have come to about the tunnel in no way abrogates the undertaking which the Prime Minister has given to the House that the whole matter shall be referred to a free vote of the House?

The PRIME MINISTER: I gave no such undertaking. What I said yesterday is what I have just said, that when communications are made through the usual channel in the ordinary way the Government will be willing to give whatever facilities the House wants for further discussion.

Mr. CHURCHILL: I think, if the Prime Minister will reflect, he will find that he said yesterday that it was the intention of the Government, or that the
Government were perfectly willing, as the ultimate solution, to allow the House of Commons to have a free vote on this question.

The PRIME MINISTER: Quite the contrary. I gave my answer fully aware of the meaning which I put on the words, and in order to avoid stating what the right hon. Gentleman says I did say.

Mr. CHURCHILL: Is there to be absolutely no means by which the great volume of opinion, which has gathered on every side on this question in the country for so many years, is to obtain expression one way or the other in Parliament?

The PRIME MINISTER: The right hon. Gentleman has no business to put those words or that meaning into the words which I have uttered. I stated quite specifically yesterday, and I repeat it to-day, that if a debate is required or asked for the Government are willing to make preparations and arrangements for a debate.

Mr. CHURCHILL: Is that not a procedure which substitutes arrangements made by the leaders of parties and high authorities in confidential relations for the decision of Parliament upon a matter of this kind?

Colonel ASHLEY: May I say to the Prime Minister that he must not assume that, because my right hon. Friend says that he is in favour of the tunnel, there is not a great number of people on this side who are definitely against it?

The PRIME MINISTER: It happens that at the moment, and for the time being, I am mainly in charge of the time of the House, and, as I said yesterday, if the usual request is made for time, it is my duty to comply with it. At the same time, it is my duty to safeguard the time of the House if there is no authoritative demand made for that time.

Sir A. CHAMBERLAIN: Do I understand that the Prime Minister promises to find time for a discussion if it is desirable without insisting that it should take the form of a Vote of Censure on the Government? Some of us find ourselves in agreement with the decision to which the Government have come.

The PRIME MINISTER: I am perfectly well aware of the fact that division on this subject runs through at any rate two parties—[Interruption.]—I am not sure as to the third. I know that the party opposite is divided, and it would be an abuse if I insisted or arranged that, if the question is put to this House, it should be put in the form of a Vote of Censure on the Government. That certainly will not be done.

Mr. BROCKWAY: Arising out of the original answer, may I ask the right hon. Gentleman whether military reasons have prevented this facility?

Mr. SPEAKER: A debate has been promised on this matter—[Interruption.] I understood the Prime Minister to say that, if a debate was asked for, there would be a debate. We had better wait for that.

Mr. LAMBERT: I do not want to put any question in regard to debate, but only to ask whether the reasons for the decision to which the Government have come on this matter will be given in the White Paper?

The PRIME MINISTER: That was the reason why I found that the statement was getting inordinately long. The reasons will be given in the White Paper.

BUSINESS OF THE HOUSE.

Sir A. CHAMBERLAIN: May I ask the Chancellor of the Exchequer whether he can give the House any indication how far he hopes to proceed with the Finance Bill this evening?

Mr. P. SNOWDEN: As I said the other day, we have not made very much progress up to now. We have only disposed of nine Clauses, and, as I said the other day, I am anxious, if possible, to make better progress. On the other hand, I do not want to prevent ample debate upon matters of importance. Clauses 10 and 11 are certainly of importance, and it would only be right that I should afford full opportunities for discussing them. The immediately following Clauses, up to Clause 16, are not so important, and three of them at least are concessions to the taxpayer. I do not anticipate, therefore, that they will take very much time. I should like to get Clause 16 this evening.

Sir A. CHAMBERLAIN: I beg the Chancellor of the Exchequer to remember the observation that the Prime Minister made the other day, that the Government were trying the House of Commons very hard, and sometimes too hard. I think the Chancellor of the Exchequer asks more than it is reasonable

to ask, or than he can have any hope of getting.

Motion made, and Question put,
That the Proceedings on the Finance Bill have precedence this day of the Business of Supply."—[The Prime Minister.]

The House divided: Ayes, 234; Noes, 110.

Division No. 346.]
AYES.
[3.52 p.m.


Adamson, Rt. Hon. W. (Fife, West)
Hamilton, Sir R. (Orkney & Zetland)
Mort, D. L.


Adamson, W. M. (Staff., Cannock)
Harbord, A.
Moses, J. J. H.


Addison, Rt. Hon. Dr. Christopher
Hardie, George D.
Mosley, Lady C. (Stoke-on-Trent)


Ammon, Charles George
Harris, Percy A.
Muff, G.


Arnott, John
Hartshorn, Rt. Hon. Vernon
Muggeridge, H. T.


Attlee, Clement Richard
Haycock, A. W.
Newman, Sir R. H. S. D. L. (Exeter)


Ayles, Walter
Hayday, Arthur
Noel Baker, P. J.


Baker, John (Wolverhampton, Bilston)
Hayes, John Henry
O'Connor, T. J.


Baldwin, Oliver (Dudley)
Henderson, Arthur, Junr, (Cardiff, S.)
Oliver, P. M. (Man., Blackley)


Barnes, Alfred John
Henderson, Thomas (Glasgow)
Owen, H. F. (Hereford)


Benn, Rt. Hon. Wedgwood
Henderson, W. W. (Middx., Enfield)
Palin, John Henry


Bennett, Capt. Sir E. N. (Cardiff C.)
Herriotts, J.
Parkinson, John Allen (Wigan).


Benson, G.
Hirst, G. H. (York W. R. Wentworth)
Perry, S. F.


Bevan, Aneurin (Ebbw Vale)
Hoffman, P. C.
Pethick-Lawrence, F. W.


Bowen, J. W.
Hopkin, Daniel
Picton-Turbervill, Edith


Broad, Francis Alfred
Horrabin, J. F.
Pole, Major D. G.


Brockway, A. Fenner
Hudson, James H. (Huddersfield)
Potts, John S.


Brothers, M.
Hunter, Dr. Joseph
Ramsay, T. B. Wilson


Brown, C. W. E. (Notts, Mansfield)
Hutchison, Maj.-Gen. Sir R.
Rathbone, Eleanor


Brown, Ernest (Leith)
Isaacs, George
Richards, R.


Brown, Rt. Hon. J. (South Ayrshire)
John, William (Rhondda, West)
Richardson, R. (Houghton-le-Spring)


Brown, W. J. (Wolverhampton, West)
Johnston, Thomas
Riley, Ben (Dewsbury)


Buxton, C. R. (Yorks. W. R. Elland)
Jones, Rt. Hon. Leif (Camborne)
Riley, F. F. (Stockton-on-Tees)


Cameron, A. G.
Jones, Morgan (Caerphilly)
Romeril, H. G.


Cape, Thomas
Jowett, Rt. Hon. F. W.
Rosbotham, D. S. T.


Carter, W. (St. Pancras, S. W.)
Jowitt, Rt. Hon. Sir W. A.
Rowson, Guy


Charleton, H. C.
Kedward, R. M. (Kent, Ashford)
Runciman, Rt. Hon. Walter


Chater, Daniel
Kennedy, Thomas
Russell, Richard John (Eddisbury)


Church, Major A. G.
Kenworthy, Lt.-Com. Hon. Joseph M.
Salter, Dr. Alfred


Clarke, J. S.
Kirkwood, D.
Samuel, Rt. Hon. Sir H. (Darwen)


Cluse, W. S.
Knight, Holford
Samuel, H. W. (Swansea, West)


Clynes, Rt. Hon. John R.
Lambert, Rt. Hon. George (S. Molton)
Sanders, W. S.


Cocks, Frederick Seymour
Lathan, G.
Sandham, E.


Cove, William G.
Law, Albert (Bolton)
Sawyer, G. F.


Daggar, George
Law, A. (Rossendale)
Scurr, John


Dallas, George
Lawrence, Susan
Shepherd, Arthur Lewis


Dalton, Hugh
Lawther, W. (Barnard Castle)
Shield, George William


Davies, Rhys John (Westhoughton)
Leach, W.
Shillaker, J. F.


Day, Harry
Lee, Frank (Derby, N. E.)
Shinwell, E.


Denman, Hon. R. D.
Lees, J.
Short, Alfred (Wednesbury)


Dickson, T.
Lewis, T. (Southampton)
Simmons, C. J.


Dudgeon, Major C. R.
Lloyd, C. Ellis
Sinkinson, George


Dukes, C.
Logan, David Gilbert
Sitch, Charles H.


Duncan, Charles
Longbottom, A. W.
Smith, Alfred (Sunderland)


Ede, James Chuter
Longden, F.
Smith, Ben (Bermondsey, Rotherhithe)


Edmunds, J. E.
Lovat-Fraser, J. A.
Smith, Frank (Nuneaton)


Edwards, E. (Morpeth)
Lowth, Thomas
Smith, H. B. Lees- (Keighley)


Egan, W. H.
Macdonald, Gordon (Ince)
Smith, Rennie (Penistone)


Elmley, Viscount
MacDonald, Rt. Hon. J. R. (Seaham)
Smith, Tom (Pontefract)


Freeman, Peter
MacDonald, Malcolm (Bassetlaw)
Smith, W. R. (Norwich)


Gardner, B. W. (West Ham, Upton)
McEntee, V. L.
Snell, Harry


Gardner, J. P. (Hammersmith, N.)
McKinlay, A.
Snowden, Rt. Hon. Philip


George, Rt. Hon. D. Lloyd (Car'vn)
MacNeill-Weir, L.
Stamford, Thomas W.


George, Megan Lloyd (Anglesea)
McShane, John James
Stewart, J. (St. Rollox)


Gibbins, Joseph
Malone, C. L'Estrange (N'thampton)
Strauss, G. R.


Gibson, H. M. (Lancs. Mossley)
Mander, Geoffrey le M.
Sullivan, J.


Gill, T. H.
Mansfield, W.
Sutton, J. E.


Gillett, George M.
March, S.
Taylor, R. A. (Lincoln)


Gossling, A. G.
Marcus, M.
Taylor, W. B. (Norfolk, S. W.)


Gould, F.
Mathers, George
Thomas, Rt. Hon. J. H. (Derby)


Graham, Rt. Hon. Wm. (Edin., Cent.)
Melville, Sir James
Thorne, W. (West Ham, Plaistow)


Gray, Milner
Middleton, G.
Tillett, Ben


Greenwood, Rt. Hon. A. (Colne).
Millar, J. D.
Tinker, John Joseph


Grenfell, D. R. (Glamorgan)
Milner, Major J.
Toole, Joseph


Griffith, F. Kingsley (Middlesbro' W.)
Montague, Frederick
Tout, W. J.


Groves, Thomas E.
Morley, Ralph
Townend, A. E.


Grundy, Thomas W.
Morris, Rhys Hopkins
Trevelyan, Rt. Hon. Sir Charles.


Hall, F. (York, W. R., Normanton)
Morris-Jones, Dr. J. H. (Denbigh)
Turner, B.


Hall, G. H. (Merthyr Tydvil)
Morrison, Herbert (Hackney, South)
Viant, S. P.


Hall, Capt. W. P. (Portsmouth, C.)
Morrison, Robert C. (Tottenham, N.)
Walkden, A. G.


Walker, J.
White, H. G.
Wilson, R. J. (Jarrow)


Wallace, H. W.
Whiteley, Wilfrid (Birm., Ladywood)
Winterton, G. E. (Leicester, Loughb'gh)


Walters, Rt. Hon. Sir J. Tudor
Whiteley, William (Blaydon)
Wise, E. F.


Watkins, F. C.
Wilkinson, Ellen C.
Wood, Major McKenzie (Banff)


Watson, W. M. (Dunfermline)
Williams, David (Swansea, East)
Wright, W. (Rutherglen)


Wellock, Wilfred
Williams, Dr. J. H. (Llanelly)
Young, R. S. (Islington, North)


Welsh, James (Paisley)
Williams, T. (York, Don Valley)



West, F. R.
Wilson C. H. (Sheffield, Attercliffe)
TELLERS FOR THE AYES.—


Westwood, Joseph
Wilson, J. (Oldham)
Mr. Charles Edwards and Mr.




Paling.


NOES.


Acland-Troyte, Lieut.-Colonel
Ferguson, Sir John
Rodd, Rt. Hon. Sir James Kennell


Ainsworth, Lieut.-Col. Charles
Galbraith, J. F. W.
Russell, Alexander West (Tynemouth)


Albery, Irving James
Gilmour, Lt.-Col. Rt. Hon. Sir John
Salmon, Major I.


Ashley, Lt.-Col. Rt. Hon. Wilfrid W.
Graham, Fergus (Cumberland, N.)
Samuel, A. M. (Surrey, Farnham)


Atkinson, C.
Grattan-Doyle, Sir N.
Samuel, Samuel (W'dsworth, Putney)


Balfour, Captain H. H. (I. of Thanet)
Greene, W. P. Crawford
Sandeman, Sir N. Stewart


Balniel, Lord
Gretton, Colonel Rt. Hon. John
Savery, S. S.


Beaumont, M. W.
Gunston, Captain D. W.
Shepperson, Sir Ernest Whittome


Berry, Sir George
Hamilton, Sir George (Ilford)
Smith, Louis W. (Sheffield, Hallam)


Betterton, Sir Henry B.
Hammersley, S. S.
Smith-Carington, Neville W.


Bourne, Captain Robert Croft
Hannon, Patrick Joseph Henry
Smithers, Waldron


Bowyer, Captain Sir George E. W.
Hartington, Marquess of
Somerville, A. A. (Windsor)


Boyce, H. L.
Harvey, Major S. E. (Devon, Totnes)
Southby, Commander A. R. J.


Bracken, B.
Heneage, Lieut.-Colonel Arthur P.
Stanley, Lord (Fylde)


Brass, Captain Sir William
Hills, Major Rt. Hon. John Waller
Steel-Maitland, Rt. Hon. Sir Arthur


Buckingham, Sir H.
Hudson, Capt. A. U. M. (Hackney, N.)
Stewart, W. J. (Belfast, South)


Bullock, Captain Malcolm
Hurd, Percy A.
Sueter, Rear-Admiral M. F.


Cadogan, Major Hon. Edward
King, Commodore Rt. Hon. Henry D.
Thomas, Major L. B. (King's Norton)


Carver, Major W. H.
Knox, Sir Alfred
Tinne, J. A.


Cautley, Sir Henry S.
Lamb, Sir J. Q.
Titchfield, Major the Marquess of


Cayzer, Sir C. (Chester, City)
Law, Sir Alfred (Derby, High Peak)
Tryon, Rt. Hon. George Clement


Chamberlain, Rt. Hn. Sir J. A. (Birm., W.)
Leighton, Major B. E. P.
Turton, Robert Hugh


Chapman, Sir S.
Long, Major Eric
Vaughan-Morgan, Sir Kenyon


Churchill, Rt. Hon. Winston Spencer
Macquisten, F. A.
Wallace, Capt. D. E. (Hornsey)


Cobb, Sir Cyril
Makins, Brigadier-General E.
Ward, Lieut.-Col. Sir A. Lambert


Colfox, Major William Philip
Margesson, Captain H. D.
Wardlaw-Milne, J. S.


Colville, Major D. J.
Marjoribanks, E. C.
Warrender, Sir Victor


Cranborne, Viscount
Mitchell, Sir W. Lane (Streatham)
Wells, Sydney R.


Crichton-Stuart, Lord C.
Monsell, Eyres, Com. Rt. Hon. Sir B.
Williams, Charles (Devon, Torquay)


Croft, Brigadier-General Sir H.
Moore, Lieut.-Colonel T. C. R. (Ayr)
Windsor-Clive, Lieut.-Colonel George


Crookshank, Cpt. H. (Lindsey, Gainsbro)
Nicholson, Col. Rt. Hn. W. G. (Ptrsf'ld)
Wolmer, Rt. Hon. Viscount


Dalrymple-White, Lt.-Col. Sir Godfrey
Nield, Rt. Hon. Sir Herbert
Womersley, W. J.


Davies, Dr. Vernon
Oman, Sir Charles William C.
Wood, Rt. Hon. Sir Kingsley


Davison, Sir W. H. (Kensington, S.)
Ormsby-Gore, Rt. Hon. William
Worthington-Evans, Rt. Hon. Sir L.


Edmondson, Major A. J.
Penny, Sir George



Elliot, Major Walter E.
Pownall, Sir Assheton
TELLERS FOR THE NOES.—


Erskine, Lord (Somerset, Weston-s.-M.)
Ramsbotham, H.
Major Sir George Hennessy and


Falle, Sir Bertram G.
Roberts, Sir Samuel (Ecclesall)
Sir Frederick Thomson.


Question, "That the Clause stand part of the Bill," put, and agreed to.

SOUTHEND-ON-SEA CORPORATION BILL.

Reported, with Amendments; Report to lie upon the Table, and to be printed.

Orders of the Day — FINANCE BILL.

Further considered in Committee [Progress, 3rd June].

[Mr. DUNNICO in the Chair.]

CLAUSE 10.—(Amendment as to relief in respect of life insurance premiums.)

Sir ARTHUR STEEL-MAITLAND: Before we proceed with the first Amendment, I would like to raise a point of Order with regard to the Clause as a whole. The point of Order is that paragraph (c) imposes a charge upon the taxpayer by way of diminishing relief that he gets in the matter of Income Tax on his insurance premium, and that this charge has not been covered by the Financial Resolution. If any hon. Member will refer to the Sixth Financial Resolution on 14th April, he will find that the Resolution covers paragraphs (a) and (b), but not (c). I will explain, if I may, as briefly as I can, the way in which the charge is made. It arises becausee relief of Income Tax was divided into three grades, that is to say, incomes up to and including £1,000 a year received relief from Income Tax on premiums up to one-half of the standard rate, or, supposing the Income Tax be 4s. in the £, during this last year up to 2s. Incomes exceeding £1,000 and up to £2,000 received relief at three-quarters of the standard rate, and incomes of over £2,000 received it at the full rate of Income Tax.
That led to a queer and anomalous situation with regard to incomes just below as compared with incomes just above one of those limits of £1,000 or £2,000, as the case may be, for it created the very topsy-turvy result that but for the Sub-section referred to here, the person with the lower income might, in the aggregate, pay a larger Income Tax than the person with the higher income. The way in which it worked was this: Supposing you take two men, one of them with an income of £990, and the other with an income of £1,010, that is a difference of £20 between them. But there is this very vital difference, that one of them is just over the margin of £1,000, and the other is just under. The
person with the £20 lower income pays in Income Tax directly, of course, less in tax. With Income Tax at 4s. in the £, having £20 less income than the other, he pays £4 less, or one-fifth of £20. On the other hand, supposing he has effected substantial insurance on his life, the advantage he has got in paying less Income Tax is more than taken from him by the fact that his relief is at a lower rate. Suppose that he pays £120 a year, which is within the limit, by way of insurance premium. The man with an income of £990 in that case gets 2s. in the £ relief when the standard rate is 4s., or one-tenth. That means to say, he gets one-tenth of the £120, or £12 of relief. The man with an income of £1,010 gets relief at the rate of 3s., or half as much again. Therefore, on the same premium of £120, he gets not £12 of relief, but £18 of relief. In other words, the man with the lower income is better off by £4 of direct payment to Income Tax, but he is worse off by £6, owing to the fact that the relief he gets is on a lower scale, that is to say, in the net total result, apart from the special provision of Sub-section (9), he pays actually £2 more in taxation than his richer brother.
That is a sufficiently topsy-turvy result, and, naturally, some provision was necessary to set it right. Therefore, the Act of 1918 was amended by the Act of 1920, which inserted Sub-section (9) referred to. Perhaps the Committee might like to hear the words of that Sub-section. It is one of those Clauses which must have been present in the mind of the Attorney-General when he said that he hoped legislation for the future would be easily intelligible. The only thing I can say to him is that if he consents to this Finance Bill passing as it stands, he will be committing, perhaps, the greatest sin of all, because he does so with his eyes open, and the Sub-section will be made more difficult in the future by these additional words, which will add to its complexity. For crystal clearness to any ordinary reader, let me read the Sub-section which puts right the anomaly to which I have referred.
Where the tax ultimately payable by any person after deducting the allowance under this section is greater than the amount of tax which would be payable if the total income of that person exceeded one thousand pounds or two thousand pounds, as the case may be, the allowance
under this section shall be increased by a sum representing the amount by which tax at one-fourth of the standard rate on the amount of the premiums or payment in respect of which the allowance is made exceeds the amount of the tax at the standard rate on the amount by which the total income falls short of one thousand pounds or two thousand pounds, as the case may be.
In passing, I submit this to the Attorney-General, who is in favour of real intelligibility of Acts in general and particularly of Acts which impose charges on the unfortunate taxpayer, who, at least, might be able to see at one glance the sentence that is passed upon him, because if he refers to the Section he will realise that, incomprehensible as it is at the moment, when reading the new words placed in it, it will be still more incomprehensible.

The DEPUTY-CHAIRMAN: The right hon. Gentleman is raising a rather long point of Order.

Sir A. STEEL-MAITLAND: The point is, that this means that
the allowance under this section shall be increased by a sum representing the amount by which one shilling in the pound on the amount of the premiums.… exceeds the amount of the tax at the standard rate on the amount by which the total income falls short of one thousand pounds.
That means that he gets one-fourth of the standard rate which, when it was at 4s. was 1s. He gets an additional relief to the amount of a 1s. on the amount of his premium. In the case in question that is £120; therefore he gets £6. From that there is deducted Income Tax on the difference between his income and £1,000. That is £2, so that it gives him an extra £4 in all in order to cover the disadvantage that he was at and a little more. The point is this. But for this Clause, he would have been getting relief at a fourth of the new standard rate which is 1s. 1½d. per £ on the amount on the premium. That is going to be reduced to 1s. and, therefore, when you deduct from the proceeds of that the difference of the amount of the Income Tax between the income and the standard rate it leaves him sensibly worse off than he was before. That case has not been covered by Resolution No. 6 and, therefore, I submit that the Clause is out of order.

The DEPUTY-CHAIRMAN: The point of Order raised, if I understand the right
hon. Gentleman aright, is, that paragraph (c) of Clause 10 is not covered by the Ways and Means Resolution. I do not share that view for the following reasons. I have the Resolution before me. The effect of the Resolution is to substitute throughout Section 32 of the Income Tax Act of 1918, as amended, a rate of four shillings for the standard rate, with one exception, namely, "the last such reference in Sub-section (9) of the said Section." Sub-section (9) of Section 32 was not in the Section as originally enacted, but was inserted by Section 26 of the Finance Act, 1929. Subsection (9) reads as follows:
Where the tax ultimately payable by any person after deducting the allowance under this section is greater than the amount of tax which would be payable if the total income of that person exceeded one thousand pounds or two thousand pounds, as the case may be, the allowance under this section shall be increased by a sum representing the amount by which tax at one-fourth of the standard rate on the amount of the premiums or payment in respect of which the allowance is made exceeds the amount of the tax at the standard rate on the amount by which the total income falls short of one thousand pounds or two thousand pounds, as the case may be.
This Sub-section contains two references to the standard rate. Paragraph (c) touches the first of these two references and not the second. It appears to me that the paragraph is covered by the Resolution in as much as under the Resolution the words
at one-fourth of the standard rate
are to be read as "at one-fourth of a rate of 4s.," Which is the same as 1s. in the £. I have taken such advice as I could obtain. That is my Ruling, and I am afraid that I must adhere to it. If the right hon. Gentleman disputes it, there may be other stages of the Bill where it can be raised, but so far as this stage is concerned, my Ruling is quite definite.

Sir A. STEEL-MAITLAND: At what stage can we raise it? I should like to see your reasons in detail. We have taken very careful advice about this.

The DEPUTY-CHAIRMAN: The right hon. Gentleman approached me on this matter less than an hour ago. He will understand that this is a very difficult and complicated matter to grasp. During that period I have taken such advice as
I could obtain. I have given due consideration to all the points raised by the right hon. Gentleman, and I must stand by the Ruling given.

Sir LAMING WORTHINGTON-EVANS: I beg to move, in page 7, line 13, after the word "from," to insert the word "Income."
I should like to ask whether you, Sir, will not think it would be for the interest of the debate and for the convenience of the Committee if a general discussion took place upon the first Amendment, so that the separate Amendments to be put to a Division will be moved with short speeches only in order that the debate may be concentrated in a form which will be easily understood. The Clause is an extremely important one. It raises matters of first-class importance which interest a very large number of people, and it would be quite impossible, if each Amendment were taken saparately, to open the case that we think we have against the Government.

The DEPUTY-CHAIRMAN: I always take the view that, as far as the Chair can, it must meet the convenience of the Committee. If the Committee desires a general debate, on the clear understanding that there shall be no general debate on the Question, "That the Clause stand part," and only short speeches will be delivered on the Amendments selected, I am quite willing to allow it.

The CHANCELLOR of the EXCHEQUER (Mr. Philip Snowden): I think the course that has been suggested would probably be most in the interest of the Committee, and I am quite prepared to fall in with it, on the understanding that the conditions that you, Sir, have mentioned are observed.

Sir AUSTEN CHAMBERLAIN: I am anxious that the discussion should take the form which is most for the convenience of the Committee and leads to the clearest exposition of the subjects that are to be discussed, but I feel some difficulty about the arrangement that there should be no debate on the Question, "That the Clause stand part." I quite understand that, if the whole matter is opened in the form of a general discussion on the first Amendment, discussion
on other Amendments raising individual points which have been covered by the general discussion should be brief, but a Clause in passing through Committee is sometimes altered. At any rate, it is a great convenience to be able to review it as a whole with a knowledge of the shape in which it issues, and I hope you will feel, Sir, that our right to some reasonable discussion on the Question, "That the Clause stand part," may be reserved, even if we are allowed a general discussion on the first Amendment.

Mr. CHURCHILL: Even apart from a discussion on the Question, "That the Clause stand part," which naturally would be abridged in consequence of the full discussion on the first Amendment, there are certain specific Amendments which could not be disposed of simply by their being put to the Committee. There will have to be some discussion, however accelerated, on the various important Amendments in detail.

Mr. SNOWDEN: The right hon. Gentleman is under a misapprehension. It is not suggested that any Amendments shall be put without discussion. The Chairman has said that, after the general discussion, the speeches on the Amendments might be very brief.

The DEPUTY-CHAIRMAN: I hope I made myself quite clear. I am quite prepared to allow a general discussion on the first Amendment which will cover the entire Clause. I hope we shall have shorter discussions on the subsequent Amendments selected, and I do not want a discussion on the Question, "That the Clause stand part," which will be mere repetition of the first one.

Sir L. WORTHINGTON-EVANS: I think my Amendment is of real importance to the community. When we were discussing the financial resolution it was explained to us that it was intended to cover relatively small alterations in the law. It was really intended to provide that the tax-payer, who had hitherto been deducting 2s. 3d. in the £ from his insurance premiums, should in future only deduct 2s. in order that he might not get twice over a benefit which he would have got already from a former Clause. First it was represented that this was really a very small matter and, by a process of interrogation, the Opposi-
tion secured a further explanation, after the Financial Secretary had explained it, from the Chancellor of the Exchequer. That seemed to widen the scope of the Resolution somewhat but it was not until the President of the Board of Trade explained what he thought the Resolution was intended to cover that we really discovered what wide alterations were intended by the Chancellor of the Exchequer. It took three Minister to explain the Government's intentions and, when they were explained, our worst suspicions were confirmed that the Clause that was represented as so harmless and so necessary to prevent double benefits in fact disturbed the whole basis upon which the great thrift movement, as expressed in insurance, has been founded.
I propose to give part of the history of the practice that has grown up of allowing rebates from Income Tax in respect of insurance premiums. It started in 1799. I will not ask the Committee to follow it in detail from that time but I propose to tell them what Mr. Gladstone said about it. What did Mr. Gladstone say in 1853? He spoke for many hours and I will not, therefore, read the whole of his speech. He explained the principles which determined the Government in asking the Committee to approve of various alterations in the Income Tax Act. Some of it is very interesting. It sounds almost a fairy tale.
Besides fixing on the tax a temporary character, we are most anxious to do what can be done in order to meet the public feeling as to the inequality of the tax. For that public feeling we have not only respect but sympathy, while we do not admit that it is our duty, as persons charged with the conduct of public affairs, to shape our measures according to any feeling or sentiment whatever until we have examined the practical form which they are to take and tried it by the light of our understanding. We propose to introduce certain mitigations into the operation of the Income Tax. We propose to extend the principle of commutations. A more important mitigation which we propose to make is this. There is a general feeling that a man ought to have, at any rate, the opportunity of investing the savings he may make from his income without being liable to the Income Tax upon them. We do not think it possible to make provisions of that kind applicable to savings simply as such. All we can do is to say, 'If you choose to invest your savings in the form of a deferred annuity or a life assurance, the premium which you may pay upon that deferred annuity or life assurance up to one-seventh of your income, shall not be chargeable to
your Income Tax, but may be deducted from your Income Tax before it is charged.'
I will give some of the reasons which induced that statement. He continued:
I am not at all prepared to say that we would stop at that point if it were possible to do more. At the same time, this plan has considerable recommendations. I do not say that it will completely meet the case of persons who, being afflicted with sickness, cannot, except under peculiar circumstances, insure their lives.… But what I do say is this—that it is a relief which will admit of very extensive application.… It establishes, however no invidious distinctions between one class and another. It is open to all those who choose to avail themselves of it; but while it is open to them all, we know that practically the classes who are in the habit of insuring their lives are just those very classes whom it is your main object to relieve by the reconstruction of the tax—namely, classes of professional men and of persons who are dependent upon their own exertions.
It would be seen that Mr. Gladstone justified the principle of rebate of Income Tax premiums as an encouragement to thrift, and he justified the selection of this particular form of thrift because it was open to all and was helpful to those who had earned incomes and created some differentiation in favour of earned incomes as against unearned incomes. That remained the unaltered and continuous history of the Income Tax until the War. During the War years, money had to be found and the Income Tax, as hon. Members know, rose to five shillings and ultimately to six shillings, and the amount of the rebate which was given to those who were paying insurance premiums increased very largely in value. An alteration was made in 1916–17 under War conditions. It was thought then that it was unsatisfactory, and the Colwyn Committee was appointed to consider the whole incidence of Income Tax and the incidence of the rebates, including the rebates for insurance premiums. I propose to remind the Committee of what that Royal Commission reported. They first of all, in paragraph 290, summarised the position at that date. They said that:
The principle of allowing Life Insurance ance premiums as a deduction from income for Income Tax purposes was restored, after a long interval of disuse, in 1853. Mr. Gladstone, when opening his Budget for that year, defended the allowance as a mitigation of the taxation on savings. He stated that it was impossible to exempt savings from Income Tax altogether, but that to make an allowance for Life Insurance premiums
would go some way in that direction, and would especially benefit those who derived their income from their own exertions.
They go on to say:
The advantage given to insurers by this allowance has probably been a factor in the great increase and development of Life Insurance that has taken place since 1853, but whether this be so or not these developments both in volume and in variety of character were so great, that their influence on Income Tax was so important that it became necessary to review the position in 1915 and 1916. The high rates of tax that then obtained had made Life Insurance more attractive than ever, and it had become a common practice to affect policies which, though nominally Life Insurance policies, were in reality wholly or mainly a form of investment rendered exceptionally attractive by the Income Tax allowance.
No doubt there was, in these days, as no doubt there is now, some abuses of the abatement which is allowed in respect of Income Tax. Consequently some of the witnesses who appeared before the Royal Commission proposed that the allowance for insurance premiums should be abolished altogether. The Commission reported against abolition. There were others who argued that it was unfair to pick out life insurance premiums as the only form of saving which should have this particular benefit from the State and these particular allowances in respect of their annual payments. Having first said that they did not agree with the witnesses who advocated the abolition, they found sound reasons, they said, for singling out this one form of thrift for preferential treatment. They pointed out that in the Dominions and in foreign countries a similar allowance was made, and they said:
Viewing the matter in a broad and rational way we consider that this reason is sufficient to justify the State in looking with favourable aspect upon Life Insurance and in treating income that is saved and applied in this matter with special indulgence.
Finally, the committee reported that certain changes only were to be made and these changes were, in fact, embodied in the Finance Act, 1920, and, briefly, they were these, that as regards the pre-1916 policies—those are the old policies—there was no alteration at all. They were allowed to deduct the standard rate of Income Tax from their premiums. It is true that this was only in respect of incomes of over £2,000. As regards incomes of £1,000 and £2,000 they were
allowed to deduct three-quarters of the standard rate, and in the case of samller incomes not exceeding £1,000 they were entitled to deduct half of the standard rate of Income Tax. As regards the policies later than 1916, that is, those policies taken out with the knowledge that there was to be an alteration in their treatment, there was an allowance of one-half of the standard rate. The Committee will observe—and this is important—that in every case the allowance was based upon the standard rate of Income Tax. The basing of it upon the standard rate of Income Tax has always been the principle which has been adopted. You really had a continuous history for 140 years of the standard rate of Income Tax being taken as the basis upon which the deduction was to be calculated, and you have had for that period some deduction allowed. It is now reserved for the present Chancellor of the Exchequer to break the bargain which has been kept over all that period. On what ground does the Chancellor of the Exchequer allege that this alteration should be made? I suppose he does not say that it is no encouragement to thrift to allow the abatement in respect of insurance premiums? At the same time, the practical result from the point of view of the State is of extreme importance.
In answer to a question in the House the other day, the Financial Secretary replied to the effect that £18,000,000 was added to the valuation of estates arising from the policies included in the estates year by year. On the average it showed that £18,000,000 was added to the values of the estates in respect of policies included in those estates, and the amount of duty received represented only £1,600,000 as applicable to the capital of the insurance policies. The Chancellor of the Exchequer said the other day in the discussion on the Financial Resolution that he did not see how thrift could be discouraged, because in regard to the pre-1916 policies they were already taken out, and the insured, having committed themselves to taking out a policy before 1916, could not be affected one way or the other by anything which was now done by the Chancellor of the Exchequer. This was on the principle that he had got them already for purposes of taxation, and that whatever he did now they could not get out of his clutches.
There is no question that the future has also to be taken into account. What about those who are contemplating insurance? Hitherto they have known that they would get one-half of the standard rate of Income Tax as an abatement. Now we are to cut adrift from that standard rate, and in this year, instead of being half the standard rate, it is to be half an assumed standard rate of 4s. In other words, some people in future are to be cheated of 3d., and in order to gain that 3d., a relatively small sum, the Chancellor of the Exchequer is going to reverse the process of 140 years, abandon the relief on the basis of the standard rate and substitute for it this year a relief on the standard rate, less 3d., and next year some other relief, perhaps, and the following year again, a reduced rate. Once he starts on this sort of thing, where is he going to stop? Hitherto we have had the principle by which there was an abatement of half the standard rate, and the standard rate is not fixed arbitrarily for this purpose but fixed, for the purposes of taxation upon the Income Tax payers of the country. The assured people know that they are going to get, not a fancy allowance, but an allowance fixed, not in respect of what they have to pay, but in respect of what the whole of the people of this country have to pay. I have no doubt that this will really come as a great shock to thrift and to those who would otherwise rely upon the practice which has hitherto been in force.
There is another point which makes this an especially bad step on the part of the Chancellor of the Exchequer. When the Colwyn Commission determined what allowances should be made and when the Government of the day adopted that report and put it into the Finance Act, 1920, the Colwyn Committee also considered that many of these insurance societies are mutual societies and are paying, after some allowances for expenses, Income Tax upon the income which they receive and retain, and put to reserve as security for policy holders. These moneys upon which tax has been paid do not belong to the company but to the insured people. Very large numbers of insured people are only liable to pay Income Tax at reduced rates, because most of them are people of relatively small means. Although these people are only liable to pay Income Tax at the reduced rate, on these moneys which
belong to them but are retained by the societies tax is paid at the full rate, and there is no abatement. It was consideration of that fact which influenced the Colwyn Committee to come to the conclusion that there should be these allowances. The Chancellor of the Exchequer is not merely casting adrift the anchorage of the insured persons to the standard rate of Income Tax but he is also increasing the total taxation upon those who really are relatively poor people. On this point, as I understand it, the gain for the Treasury is £500,000, of which I gather that between one-fourth and one-third is to be exacted from those who took out their policies before 1916.
Where is the money to come from? It is not coming from the luxury spenders of this country and not from those whom the Chancellor of the Exchequer calls the idle rich, but from the savers of the country, the saving poor of the country whose earned incomes in future are to pay a larger taxation because of the reduction of the rebate hitherto allowed. We raise very large sums of money to give pensions to the widows of insured wage earners, but there is another class of people who have been endeavouring to provide for their own widows by weekly, monthly or yearly savings. They have put these sums on one side by insuring their lives for a relatively small sum in order that their widows might have a small annuity or a small capital which would enable them perhaps to earn their own living or to obtain an annuity from the insurance money. While on the one hand we are raising large sums of money to give widows' pensions, the Chancellor of the Exchequer is taxing the very people who are trying to exercise thrift. This is not a rich man's question. I have had communications from the Association of Industrial Assurance Companies and Collecting Friendly Societies upon the subject. They are very much alarmed. They say that this proposal affects them as it affects other people.
If the Chancellor of the Exchequer gets this money, it will be dirty money, obtained by a breach of legislative practice of 140 years' standing. It may not be perhaps a contract that he is breaking or a bargain that he is breaking—those words might not be literally and legally applicable—but there is a moral
contract or bargain which he is breaking ruthlessly. I have not the slightest doubt that he is taking from those who are endeavouring to help themselves and seeking by their thrift and self-sacrifice to protect their widows. I hope that the Clause will be rejected. I do not believe that there is any Amendment that can be moved that will go to the root of the question, but there are same Amendments which I hope will be moved because they do offer some mitigation. There is only one proper method of dealing with the matter, and that is for the Chancellor of the Exchequer to withdraw the Clause.

Mr. P. SNOWDEN: Anyone ignorant of what is in this Clause would, after listening to the right hon. Gentleman, come to the conclusion that I have committed a crime unparalleled in the criminal annals of this country. The right hon. Gentleman indulged in a great many general statements and rhetorical statements, but he refrained from giving one figure, one instance, one case, in support of the accusations that he has made. He spent a good portion of the later part of his speech in saying that this proposal is going to inflict a grievous burden upon people of small means, and that it was in the interests of these people of small means that he was making his vigorous appeal. He knows quite well that there is not an atom of foundation for that statement. He knows that all people of small means and most people with higher incomes are not affected by the proposals of this Clause.

Sir L. WORTHINGTON-EVANS: They are.

Mr. SNOWDEN: The right hon. Gentleman went back to the early history of these abatements on life assurance and said that they originated in the eighteenth century. I believe that some attempt was made in that century to deal with that matter, but it fell into abeyance and was not revived until Mr. Gladstone made the speech which the right hon. Gentleman has quoted so copiously. The right hon. Gentleman said that he would give part of the history of the life assurance abatement, and he confined himself to giving a part only. I am not going to spend the time of the Committee
by going at length into the history of the matter, but there are one or two matters of recent history to which I would call the attention of the right hon. Gentleman and of the Committee. The right hon. Gentleman said that on the Report stage of the Budget Resolution it took three Ministers to explain what was meant by this proposal. I would say that it took three Ministers to make the party opposite understand what was embodied in the provisions of this Clause.
This Clause provides rates of relief for life assurance. Last year the rate of relief was half the standard Income Tax rate, and on an Income Tax of 4s. in the pound the allowance for life assurance premiums was 2s. The pre-1916 policies had a different rate, which varied according to the amount of the income from 2s. and 3s. to 4s. It is true that these reliefs were related to the standard rate, but the new graduation that we have so far carried in Clause 9 has upset those reliefs. The Royal Commission on the Income Tax, to which the right hon. Gentleman referred, pointed out that if some new graduation of the Income Tax should be adopted in the future it would be necessary to review the insurance abatements, to harmonise them with the new system of graduation which might be adopted.

Sir HENRY BETTERTON: Has the right hon. Gentleman the report before him?

Mr. SNOWDEN: No. The new graduation upsets these reliefs and therefore some adjustment has been made necessary.

Sir L. WORTHINGTON-EVANS: I would ask the right hon. Gentleman whether the Clause which alters the figure from £225 to £250 does not apply to everybody, whether insured or not.

Mr. SNOWDEN: Yes.

Sir L. WORTHINGTON-EVANS: Then how can the right hon. Gentleman relate it to insurance?

Mr. SNOWDEN: I will deal with that point in a moment.

Sir A. STEEL-MAITLAND: rose—

Mr. SNOWDEN: I would prefer to continue. I could have interrupted the
right hon. Member for St. Georges (Sir L. Worthington-Evans) on every sentence, but I refrained from doing so.

Mr. CHURCHILL: We are in Committee. We are in conversational Committee.

5.0 p.m.

Mr. SNOWDEN: In paragraph 300 the Royal Commission says that if the graduation scheme should in future be varied the question of life assurance relief would need to be reconsidered. This relief for life insurance is given from the taxable income, and the taxable income is something different from the gross income of the Income Tax payer. The taxable income is arrived at after the various allowances have been made, such as the allowance for the wife, the children or dependents. A taxable income—I am giving the figures very roughly—of about £250 might, in the case of a married man with two children, represent a gross income of about £700 a year. Last year the first £225 of taxable income paid 2s. in the pound. We have altered that to £250. If I had followed the ordinary course, the amount payable would be 2s. 3d. in the pound instead of 2s. but on the first £250 only 2s. in the pound will be paid. With regard to life insurance allowances there is a limit. The relief cannot exceed one-sixth of the person's income and it cannot exceed 7 per cent. of the capital value of the sum assured. The right hon. Gentleman has been opposing this proposal because of its effect upon the poor, thrifty people. The fact is that any grounds of complaint that there may be can only apply to something like 1 per cent. of the taxpayers. The right hon. Gentleman admitted during the Report stage of the Resolution that if a person were allowed to deduct half the Income Tax of 4s. 6d., namely, 2s. 3d., he would be getting back more than he had paid.

Sir L. WORTHINGTON-EVANS: Yes, but I also gave the remedy.

Mr. SNOWDEN: The right hon. Gentleman has not incorporated it in the Amendment. The proposal that is now submitted to the Committee would leave these people as they were before. I believe it is mentioned in the White Paper that has been circulated that it is only where premiums exceed £475 a year that there could be any possible
grievance, and that is a very exceptional premium for a life insurance policy. The people for whom the right hon. Gentleman expressed so much concern, the poor people, certainly do not pay insurance premiums of £475 a year; £475 represents one-sixth of an income of £2,850 a year, and it is only there that any possible grievance can exist. Of course, any observations I am making now apply only to policies taken out since 1916.
The right hon. Gentleman repeated several times in his speech a charge that be made on the Report stage, that we were breaking a bargain. I might answer that by saying that there can be no such thing as a bargain made between the Government of the day and the individual.

Sir L. WORTHINGTON-EVANS: I did not suggest it.

Mr. SNOWDEN: The right hon. Gentleman said it was a bargain, and the language with which he concluded his speech was of the most violent kind. He said that it was not a bargain signed and sealed, but that it was a moral obligation. I will deal with that. There can be no such thing even as a moral obligation to maintain a rate of Income Tax or of any form of taxation, or to maintain any allowances which may be in existence at the present time. I remember that Mr. McKenna, as Chancellor of the Exchequer, reduced the figure for the abatement of Income Tax from £160 to £120, or something like that, and justified it on that very ground. He said that there was no bargain that it should be kept at £160, and when it became necessary to make a change, the Government were perfectly justified in doing it. It might have been thought, from what the right hon. Gentleman said, that there have never been any changes in regard to life insurance which were inimical to the policy-holders, but what was done in 1916?

Sir L. WORTHINGTON - EVANS: During the War!

Mr. SNOWDEN: Things were justifiable then which are not justifiable now, apparently, but the right hon. Gentleman is not aware, seemingly, of the fact that financially the War is not over, and that we are still in a period of war
finance and, I am afraid, likely to remain so for a very considerable time. The very suggestion made by the right hon. Gentleman was made when Mr. McKenna in 1916 proposed to limit this relief. Mr. McKenna resisted very strongly the argument that there had been any contractual rights, and eventually he carried his contention. He said—the quotation is not long, but it is very important:
It is perfectly open to the House at any time, without inflicting any injury, to cease to give the allowance which has been allowed to be given in the past, provided, in ceasing to give the allowance, the House does not take back something which has already been allowed.
I am not proposing to do that. He went on:
The House is absolutely at liberty, without any question of breach of contract, or retrospective taxation, to refuse to continue allowances which have been made in the past. If there was anything in this doctrine it would be equally true to say that it was retrospective taxation when the abatement in respect of Income Tax was reduced from £160 to £120 by this House, which, with enthusiasm, cut down the abatement."—[OFFICIAL REPORT, 13th July, 1916; col. 602, Vol. 84.]
Allowances for life insurance are part of the Income Tax system, and in any year there may be a change in the incidence of the Income Tax allowances, abatements, and the like. Mr. McKenna was perfectly right—and I am amazed that anybody should try to maintain the contrary—when he said that this question of allowances on Income Tax was a matter which the House of Commons have a legitimate right to reconsider. He said on that same occasion:
It is not retrospective taxation.… to discontinue an allowance which has been made in the past.
He took away what you might call rights, if you want to apply such a word on certain policies which existed at that time. When the Super-tax was introduced, the Super-taxpayer got the deduction on both Income Tax and Super-tax just as the ordinary Income Taxpayer got his Income Tax deductions, and he got his relief for life insurance allowance from his Super-tax at the top slice, the highest rate of his Super-tax. Mr. McKenna took that away.

Sir L. WORTHINGTON-EVANS: That was very wrong.

Mr. SNOWDEN: Very wrong, but it was taken away, and therefore, having been done and Parliament having accepted it, the whole case about bargains, attempted to be made by the right hon. Gentleman opposite, falls completely to the ground.

Sir L. WORTHINGTON-EVANS: The right hon. Gentleman ought not to follow a bad example.

Mr. SNOWDEN: I think I have dealt with all the points raised by the right hon. Gentleman. As I pointed out, 99 per cent. of the people are not affected injuriously by this proposal. There is, I admit, a very small minority, but it would be quite impossible to make the change which is necessary on account of the change in the graduation without doing perhaps some slight injury to one person here and there. The right hon. Gentleman mentioned a sum of £500,000 as the cost, but—

Sir L. WORTHINGTON-EVANS: I got that figure from the right hon. Gentleman himself. I do not know anything about it. I asked him what was involved, and he replied that it was £500,000 and a quarter or a third of that sum on the pre-1916 premiums.

Mr. SNOWDEN: The amount that is involved is about £150,000 in the pre-1916 premiums.

Sir L. WORTHINGTON-EVANS: And £500,000 in the others.

Mr. SNOWDEN: £500,000 in all, but the amount that would be taken from each individual would be very small. If the right hon. Gentleman would refer to the White Paper, he would find that the figures are given on page 5.

Sir L. WORTHINGTON-EVANS: It is a very large number of people.

Mr. SNOWDEN: In the case of a taxpayer with an income greater than £2,000 a year who pays a premium greater than £237, he would only lose upon the excess over the £237 and the amount he would lose would be generally a fraction of a penny in the £ spread over the whole of the premium.

Mr. ARTHUR MICHAEL SAMUEL: We sympathise with that point of view and try to protect the Exchequer by the
first Amendment on the Paper, so that the Exchequer can have no right to do what we think is an injustice.

Mr. SNOWDEN: We have carefully examined all the Amendments which hon. Members have put forward, and there is hardly one of them—and this particularly applies to an Amendment standing in the name of the right hon. Gentleman—which, while it might give relief in some cases, will not leave a similar hardship, if you call it so, upon a small number of others. The right hon. Gentleman said that this would give a blow to thrift, and that people would say, "What is the use of saving? We have been saving under the expectation that we should get this relief, and it has been taken from us.' As a matter of fact, it has not been taken from them. This change has become necessary, as I say, because of the change in the graduation, and we have dealt with this question in a way which inflicts the smallest possible amount of hardship upon any individual. There is no intention at all of dealing with the question of life insurance abatements. I am not making an attack upon them. The right hon. Gentleman asked if I advocated or supported any such proposal. Most certainly not, and if I thought the proposals in this Finance Bill were going to strike even the mildest blow at the thrifty habits of the people I should be quite prepared to sacrifice the comparatively small revenue which the Exchequer receives—

Mr. CHURCHILL: Will the right hon. Gentleman allow me—

Mr. SNOWDEN: We might just as well conduct a conversation.

Mr. CHURCHILL: Will the Chancellor of the Exchequer tell us what that comparatively small revenue will amount to?

Mr. SNOWDEN: I have just told the Committee the amount. If I thought this proposal was going to strike a blow and involve any real hardship upon any individual, I would willingly sacrifice the relatively small amount of revenue which is involved. Even if I was willing to do this we should find administrative difficulties such as I have mentioned in the way, and we should be giving more to some people than they are entitled to and little relief to a much smaller number of people.

Sir L. WORTHINGTON-EVANS: Will you think again before the Report stage?

Mr. SNOWDEN: I am willing to do that, but I doubt very much whether we shall be able to devise any better plan than that which we are now submitting to the Committee.

Mr. ERNEST BROWN: I regret that the Chancellor of the Exchequer has not seen fit to deal with this point. It is the Treasury officials who have discovered this little point, but they must really think it a little mean. While the sum of money at stake is not large there is a definite point of principle involved. I can assure the Chancellor of the Exchequer that we are getting many representations from people throughout the country, not supporters of the party above the Gangway upon this matter. While the House of Commons is free to change the basis of taxation yet the State does have regard to an understanding arrived at, especially in relation to an undertaking which from its very nature must cover a long period of years. The White Paper of the right hon. Gentleman himself makes that quite clear, because it says:
There is a distinction drawn between pre-1916 policies, and post-1916 policies.
Successive Chancellors of the Exchequer have taken the view that there is a distinction between a contract made before 1916 and a contract entered into after 1916. That being so, the Committee should have regard to the point of principle which is involved. What is the point of principle? I do not want to go back to 1799 when this allowance was first introduced, let me go back to 1920, when the arrangement which it is now proposed to disturb was entered into after the Report of the Royal Commission. The principle is this, that in regard to these allowances there should be a definite relation between the rebate given by way of allowances and the standard rate of Income Tax. There has been more than one regraduation of the Income Tax since 1920, and I cannot imagine that it is necessary for the purposes of the right hon. Gentleman's new scheme that he should take this point into consideration now. The evidence given to the Royal Commission makes it clear that before they assented to this definite relation between the rate of Income Tax and the rebate for allowances
they had considered the question of graduation. Under the heading, "Problem created by graduation," they say:
If Income Tax were as formerly at a uniform rate save for the distinction between earned and unearned income, this question woud not arise. The rate would without doubt be the rate charged on what is known as unearned income. The system of graduation introduced into the tax in recent times, however, creates a problem which in this case cannot receive the same solution as in the case, for example, of a body of shareholders. An ordinary trading or investment company is charged by deduction or otherwise at the maximum rate of pay, but the charge upon the company is only a convenient though indirect way of reaching the individual. When the profits of such a company are divided each member received his share under deduction of tax at that rate, and if he as an individual is not liable to the maximum rate of tax he recovers the difference between that and the rate, if any, to which he is properly liable by applying to the Inland Revenue Department far a refund. In the case of insured persons the opportunity for such an adjustment does not arise. The interest earnings go at once into the common fund, and ultimately come out in the form of capital as part of the sums assured by the policies. There being no separate allocation or payment on interest to individuals no one can say that he has received so much, and that this having borne tax at the maximum rate he is entitled to a return of the difference between such tax and the amount with which he was properly chargeable. Equality of treatment, however, as between one set of persons and another, requires that the constituents of a life office shall in some ways have a corresponding relief afforded to them.
They came to three conclusions:
The offices submit that their basis of taxation once determined shall be adhered to, and there should be no option to the Inland Revenue to change from time to time to another basis;
That they should not have to bear the maximum rate of tax, seeing their constituents are not, as a whole, liable to such rate;
That the form of relief best suited to their case is to charge a modified rate of tax corresponding as nearly as may be to the average liability of their constituents:
It has been the practice since 1920 to fix the rebate on these policies in a definite relation to the standard rate of Income Tax. That, I understand, is what is causing uneasiness throughout the country.

Mr. P. SNOWDEN: Are you suggesting that we should put back the half rate upon these post-1916 policies?

Mr. BROWN: The answer is that I am proposing that the present arrangement with regard to the relation of the rate of rebate to the standard rate of Income Tax should not be disturbed. I can see no reason for disturbing it.

Mr. SNOWDEN: I have been asked to consider this matter between now and Report and, therefore, I want to be quite clear what it is the Committee is asking me to consider. I want to know quite definitely whether the hon. Member is suggesting that people who hold post-1916 policies, which under the new graduation only pay 2s. in the £ should get the half rate of 2s. 3d. allowed to them.

Mr. BROWN: The answer is that if they are liable to 2s., they should pay 2s., and if they are liable for 2s. 3d. they should be liable for 2s. 3d. There is a great feeling about this matter. It is a small financial point, but the principle is being disturbed, and it is this disturbance which is causing much anxiety throughout the country. There is no doubt that the whole arrangements of life insurance societies since 1920 have been based on the assumption that this relation between the rate of allowances and the standard rate of allowances would be maintained. That is what we want to safeguard. This may be but a disturbance, but if it is granted now there can be no assurance in the minds of those who have to carry on this important business, which concerns rich and poor people alike, that in the future we may not have far greater distortions. I hope the Chancellor of the Exchequer will give us a little more sympathetic answer than he has, for I can assure him that he is causing a world of uneasiness amongst the people who have to conduct this great branch of our national business.

Major HILLS: The Chancellor of the Exchequer reminded us that we are still in the period of War finance. No reminder of that is necessary, we are all very well aware of it. I want to be quite clear about one point, and that is that nobody will be affected unless they pay £475 per year in premiums. Is that so?

Sir L. WORTHINGTON-EVANS: No, post-1916.

Major HILLS: It means that until a man's income rises to £2,800 per year he does not suffer anything by these calculations. I had not appreciated that
fact. I want to be quite clear that this Clause affects nobody until his income is nearly £3,000 a year. It is a point of great importance, because it affects the arguments which have been used and it must affect our approach to this Clause if we know that it only applies after a man's income reaches £3,000.

Mr. CHURCHILL: It does not matter how unjust it is.

Major HILLS: I am not dealing with that point.

Sir L. WORTHINGTON-EVANS: Will my right hon. and gallant Friend allow me. The statement of the Chancellor of the Exchequer is only true if you take into account the benefit which some people get because the £235 has been raised to £280. That is given to everybody, whether they are insured or not, and the Chancellor of the Exchequer has no right to allot that to the insured person.

Major HILLS: I thought there was a catch somewhere. I am a simpleminded person and I was taking the statement at its face value. The next point of the Chancellor of the Exchequer was this, that no taxpayer should get a greater abatement on the one-sixth of his income in insurance premiums than he pays in taxes, and it is not fair that on that one-sixth that he should get an abatement of 2s. 3d. in the £ whereas he pays only 2s. in the £ Income Tax. Nobody on this side of the Committee wants that. Let me read the words of the Amendment:
Provided that relief shall not be granted at a greater rate than the maximum rate of Income Tax payable by the taxpayer.
Surely that is quite plain. All we ask is that the right hon. Gentleman shall not divorce the relief from the standard rate of Income Tax. That is an obvious advantage; otherwise, the only relief we get is what the Chancellor of the Exchequer may choose to give. The Chancellor of the Exchequer said that he did not make an attack on life assurance abatement. I assure him that very serious alarm has been caused. I quite agree that it is an infringement of the general principle of Income Tax that he should deal with the expenditure of the income and not only with the receipt of income. Speaking generally, however beneficially a man may spend his
income he pays the same tax, and what you tax is what goes into a man's pocket and is not affected by the way it is paid out.
But surely there is a very special case for life assurance? It is a very admirable means of thrift. That brings me back to the point of the statement that this affects only the rich. As to that I have two things to say. First of all I think it is rather unfair in small things to impose a special burden, even though it does fall upon a class of taxpayer for whom the Chancellor of the Exchequer has very little sympathy. Secondly, is he not in the end doing more harm than good to the revenue? Do not let the Chancellor of the Exchequer forget the figures that were given the other day. £18,000,000 of life assurance comes every year within the purview of Inland Revenue. He is dealing with a state of mind which may be moved by financial or by psychological considerations. If people think that there is less advantage in taking out a life policy than there was before, is it not highly probable that in the end the revenue will suffer? Take the case of the mutual societies, which was dealt with by my right hon. Friend who moved the Amendment.
Does the Committee appreciate what is happening in the case of mutual insurance societies? In those societies certain people come together, pay money into a common pool, expenses are paid out of that pool, and the policies that members of the society take out are paid out of the pool. After those payments are made the revenue is treated as profit and is taxed by the Chancellor of the Exchequer. I believe that is a correct statement. I can never see that the Chancellor has any more right to tax this profit than to tax the co-operative societies. The principle is exactly the same. But still the tax has been and is being levied. Do not let the Chancellor of the Exchequer forget that already a burden of an excessive character is laid upon the body of insured persons, and especially of persons insured in mutual societies. Some special consideration should be given to them. I do not think that all tax arrangements are irrevocable. But you should do things with good cause and for some sort of necessity. There is no sort of justice at all in this case. I do not think that from the Chancellor of the
Exchequer's own point of view, for the very small return on this tax it is worth while upsetting an arrangement which has existed for 10 years and has been thought to be a permanent arrangement. For these reasons I hope that the right hon. Gentleman will reconsider his decision. As far as the revenue is concerned it is a very small matter. Surely the balance of advantage and justice lies very heavily on the side of deleting this Clause altogether?

Mr. RUNCIMAN: As far as I can see the point made by the Chancellor of the Exchequer and the only thing at which he is aiming is to prevent a man getting 2s. 3d. back for a 2s. payment. Very roughly that is what it means. I have no doubt that if the law were in such a state, or if he left it in such a state as to provide for a man getting 2s. 3d. back for 2s., there would be something to be said for amending the law, and, if necessary, inserting a Clause like this in the Finance Bill. But the Amendment covers the point, as I understand it. If that really is the point, I beg the Chancellor of the Exchequer between now and Report to reconsider his decision. My reason for pressing that on him is not the small sum of money at stake, but the whole relation of the Exchequer and the State to insurance societies.
It is true that there are numbers of these insurance institutions which are proprietary concerns, some of them very prosperous. But the great mass of them, while proprietary, deal with a great deal of profit by way of bonuses. They have that mutual element in them. Apart from them, there is a very large number of mutual companies which do not divide any profit amongst any proprietors, but the whole of whose profits are divided amongst the policy holders. I do not want to enter into the rival merits of offices, but they are societies which ought to be especially encouraged by the Chancellor of the Exchequer. I know that he has sympathetic feelings towards co-operative societies. So have I and a great many other Members. These are of the nature of co-operative societies. The case that occurs to my mind is not that this is going to be a deterrent, on financial grounds, to an increase of new business in these institutions,
but that it does alter the atmosphere in which they conduct their operations.
My right hon. Friend quoted Mr. McKenna as to the right of this House to vary allowances. I quite agree that that is sound doctrine. But you can carry it too far. There ought to be some limitation to that doctrine of the House doing what it likes in matters of taxation and allowances to suit the finances of the year. No Chancellor of the Exchequer has ever been bound rigidly not to make such changes as the necessities of the year demand. I know what the right hon. Gentleman has in mind, but at the same time every Chancellor of the Exchequer has respect for what may be called long-term contracts. I should be very much mistaken in the right hon. Gentleman if I thought that he could in any circumstances come and calmly propose that the 5 per cent. War Loan should suddenly become 4 per cent. His reason for refusing to do that is that he regards it as a long-term contract. Similarly, in insurance institutions, the policies are long-term contracts, taken out in the circumstances of the day and in anticipation of the fact that the Chancellor of the Exchequer would apply the same principles of continuity with regard to these contracts as with regard to his own financial obligations.
I admit that the parallel is not quite accurate. But the way in which these things are done justifies me in saying that if the Chancellor of the Exchequer departs from something that has been in the nature of an understanding he will disturb the whole atmosphere in which life insurance is conducted. I suggest that it is a good plan, from the right hon. Gentleman's own point of view, to keep on good terms with the insurance institutions. He knows that if he has any conversion operations to carry through, any further loans to float in the market, there are no more useful offices to co-operate with him than the insurance institutions. They have shown their patriotism in the past by taking out very large blocks of national stock when they could have made much greater rates of interest by other investments. They have done that in the past and they are prepared to do it in the future. That fact ought to be kept in mind.
My second point on that general consideration is that the insurance institutions provide the Chancellor of the Exchequer with a very large amount of revenue which he would not otherwise be able to collect. The connection between insurance and Death Duties is becoming daily greater. If the right hon. Gentleman puts an obstacle in the way and creates any apprehension which would prevent life insurance spreading, especially for dealing with tax obligations in the future, he will be doing injury to the Exchequer. On these general grounds, which really carry weight in the minds of people who wish to take out policies, I hope that he will between now and Report stage reconsider his decision. I think he will find that the amount of revenue that he will collect is not worth while, and that he can safeguard himself by an Amendment which, if not in the exact words of that moved, may be on the same lines. He would thus relieve the minds of many people who are now disturbed.

Mr. PALMER: I would not have intervened but for the fact that I feel sure that the Committee does not fully appreciate all that is involved in this question. There is a real sense in which insurance follows the action of a Chancellor of the Exchequer. The more the Chancellor of the Exchequer taxes people on their incomes and by means of Death Duties, the more a certain class of people insure. If Death Duties go up people increase their insurance to make cover for that purpose. It is so also with Income Tax. The 6d. rise in Income Tax will cause a good many people to cover their risk with more insurance. These are people who have the insurance mind. It is a definite calculation that a person who has got into the insurance habit will take full cover on his life. I wish that everyone, rich and poor, would take that full cover of their lives by insurance. It would be a good thing for the nation and the Exchequer, and many costs which now fall on the public purse could be obviated, if people covered risks as they ought to do, scientifically and properly, by insurance.
I am not going to argue about the abuses of insurance. I know perhaps better than other hon. Members that there have been abuses but I also know
that this country, in the matter of insurance, has travelled very rapidly during the past few years and my only desire in intervening in this debate is to ask the Chancellor not to do anything which would prejudice the inherent British attitude of utilising insurance to cover risks and even taking advantage of insurance to make provision in the matter of imposts for Income Tax, Surtax or Death Duties. I assure the right hon. Gentleman that, with the best will in the world to support him in the proposals which he is making in the Finance Bill, I should at the same time be much obliged if something could be done on the Report stage to meet this small point. I ask the right hon. Gentleman to do so, largely on the ground that this proposal will be regarded by many thousands of policy holders as a gesture on the part of the Government not to encourage but to deter insurance.

Sir DENNIS HERBERT: I wish to put to the Chancellor of the Exchequer one or two reasons, by way of an appeal to him to meet our views, and, therefore, I hope I shall not allow myself to say anything which might justify the right hon. Gentleman in again accusing me of having grown rather warm on this subject. One of the right hon. Gentleman's defences to the arguments adduced from this side is the precedent of what Mr. McKenna did in 1916. When we say that that precedent ought not to be followed because it was during the War period, the Chancellor's answer is that we are still in the War period as regards finance. But, financially, this is a very different sort of War period from that which ended in November, 1918. Up to November, 1918, we were faced with the necessity of raising enormous sums for the prosecuting of the War. That necessity is now at an end, and, therefore, there is less excuse now for doing the things which had to be done in order to raise the tremendous sums required every year for the prosecution of the War.
We argue that, in this matter, the Chancellor of the Exchequer will be upsetting confidence, and dealing a blow at the extension of life insurance and at thrift, if he attempts to alter the system under which in the past this relief in respect of insurance premiums has been definitely related to the standard rate
of tax. The Chancellor of the Exchequer has spoken a great deal about the graduation of the Income Tax. We quite understand the way in which Income Tax is described as a graduated tax and we have the graduations set out in the White Paper but the ordinary taxpayer in the less wealthy classes does not regard Income Tax—leaving out Surtax,—as a graduated tax. He regards it as a tax at a standard rate, fixed every year, and I think he is correct. I say so more confidently because the law has been altered in recent years in such a way that the relief given on the first £130 or whatever it may be and the further relief at half the rate, are given in the form of repayment of tax. Therefore, strictly speaking, Income Tax, as distinct from Surtax, is not a graduated tax but a tax at a standard rate. The ordinary small life insurer has certainly got that idea into his mind. He has got from the report of the Income Tax Commission the idea that this question of rebate in respect of insurance has been definitely settled once and for all on the basis that the rebate is related to the standard rate of tax.
The hon. Member for Greenwich (Mr. Palmer) spoke just now of the increase in life insurance in recent years. There has been some, but nothing like the increase that ought to have taken place. The amount of insurance per head in this country is much lower than it is in other countries, and is certainly immensely lower than it ought to be. The harm which the Chancellor will do by insisting on this Clause will not be merely the levy which he is making, or the penalty which he is inflicting, or whatever you may choose to call it, upon policy-holders of a certain kind. The harm will be much greater than that. It will be the first occasion since the end of the War on which the relation of rebates in respect of insurance policies to the standard rate of tax has been altered. Consequently, there will not be the feeling of security which has existed in the past that that relief, as related to the standard rate of tax, will remain unaltered. The policy-holder will feel that whereas that relief, related to the standard rate of tax, is being altered only by a comparatively small amount this year, this change will be used as a
precedent for altering it to a much greater extent in future years. That is the reason why I fear that this Clause, if insisted upon, will militate against the efforts which are being made by life insurance companies, by social workers and by many others to increase the amount of life insurance among people with incomes even up to £3,000 a year.
The Chancellor will agree that people with a gross income of £3,000 a year, if they are of a certain position, are not to be regarded as wealthy people. If a man who has an income of £3,000 a year gross, mainly an earned income is likely to leave behind him a widow and several children he ought to insure very heavily. The figure of £3,000 a year may seem to be a high figure to fix as not meaning wealth, but I put it as high as that. My argument, however, is just as good if I put it at £2,000 a year. These are the people who, for the sake of the future revenue of this country, should be encouraged to take out cover on their lives. It is a form of automatic saving, of course, and it will result in increasing the taxable wealth of the country. If the right hon. Gentleman insists upon this change it will go very much further than the proposal in his own Clause. It will mean the creation of a precedent and the upsetting of what policy-holders thought was definitely settled, namely, the fixing of this relief in relation to the actual standard rate of tax for the time being, whatever it may be.

Mr. P. SNOWDEN: I cannot, of course, resist the appeals which have been made to me from both parties opposite. It is my business in the conduct of this Bill through the Committee stage to hear criticisms and objections and suggestions and I am quite ready to do so. It is quite true that there is not a great deal of money involved in this proposal, and it is not for the sake of the paltry £150,000 concerned that these provisions have been made. We thought that they were necessary as a corollary to the proposals which we were making in reference to the change in the graduation. I frankly say that I am not, perhaps, prepared to speak quite so definitely on this matter now as I was in the conclusion of my previous remarks, but if the Committee would care now to give a formal and non-committal passage to this Clause, I should not accept that as committing the party
opposite at all to it in this form, and I should be willing to take the matter into full consideration between now and the Report stage. I hope that with the ingenuity of the able officials of the Revenue Department we may be able to devise some Amendment which will meet the criticisms and the suggestions of hon. Members opposite.

Sir L. WORTHINGTON-EVANS: I am grateful for the obvious intention of the right hon. Gentleman to meet the Opposition in this matter, but I think it would be convenient if he could make his meaning a little more clear. I do not ask him to indicate the exact methods in which he proposes finally to carry out his suggestion, but I would ask if it is his idea to try to find some means, for example, of not altering the pre-1916 policies and of not altering subsequent policies, provided they do not receive back in abatement more than they pay to the Exchequer?

Mr. P. SNOWDEN: Of course, I do not like to be committed in detail. I do not say that to the minutest detail we shall be able to meet all these points, but we will make every effort possible to meet what is I think intended in the Amendment of the right hon. Gentleman the Member for Farnham (Mr. A. M. Samuel), which proposes to insert:
provided that relief shall not be granted at a greater rate than the maximum rate of Income Tax payable by the taxpayer.

6.0 p.m.

Mr. CHURCHILL: I congratulate the Chancellor of the Exchequer on having deferred to what was the general wish expressed from all quarters of the Committee. The right hon. Gentleman is wise to adopt at the outset a mood of seeking to invite the Committee to share to some extent in the actual shaping of legislative proposals. It is very difficult to do that if the possibility of debate affecting legislative proposals is excluded, and we are reduced to what is little more than a trial of physical strength and imaginative volubility. Once the Government show that they are willing to learn by the debates—for, after all, almost every prolonged debate in Committee throws light on the subject—and to make their legislation harmonise with the general opinion of the House, we may make more rapid progress than it would be reasonable
to expect in the face of an adamantine and inflexible opposition.
We on this side have never sought to leave the right hon. Gentleman in the anomalous position of having to allow a rebate of 2s. 3d. on an Income Tax which is chargeable only at 2s. We wish to meet him on that. We recognise that, with the new graduation, that point has to be met, and my right hon. Friend has suggested one method by which it might be met, but we have not the facilities of the draftsmen and the trained legal advisers which are at the disposal of the right hon. Gentleman and it may well be that that purpose can be expressed in some other way. It might not, but the right hon. Gentleman can see perfectly well what we wish, and I gather that if that were conceded, and his difficulty met by another form of words, he would be willing to leave the rest of the Clause out and make it inoperative, and to have no more in the Clause than will maintain the standard rate and the proportion of the rebate to the standard rate for all other cases.

Mr. P. SNOWDEN: I gather that the Opposition do not want to take out paragraph (c), which was the subject of a long point of Order just now, because that is really removing an anomaly which, I think, the Opposition are quite as anxious to remove as we are.

Mr. CHURCHILL: I am only on the specific point and the part of the Clause which relates to this point. I gather that the right hon. Gentleman will study how he can meet the point put forward by the hon. Member for Farnham (Mr. A. M. Samuel). In that case, our general debate upon this aspect might well be abridged.

Sir ASSHETON POWNALL: Will the Chancellor of the Exchequer consider consulting the insurance interests? I have been in touch with them on this matter and they wish to help in every way.

Mr. SMITHERS: I want to reinforce what my hon. Friend has asked. I have a friend who is high up in the insurance world; he has no political bias, and he assures me that Clause 10 will do a real harm to the industry. The office to which he belongs has refused to do business of a tax-dodging character, as far as it was possible in the face of competition with other companies. I
beg the Chancellor to ask somebody of that kind, who is unbiased politically and is out for clean insurance business, to consult with him and to point out the way in which it can be done.

Sir L. WORTHINGTON-EVANS: I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

CLAUSE 11.—(Deduction of tax.)

Sir D. HERBERT: I beg to move, in page 7, line 29, to leave out Sub-section (1).
I put this Amendment down rather in a hurry, and, to some extent, under a misapprehension, and I therefore shall not trouble the Committee so long in regard to it as I might otherwise have had to do. The Committee ought to realise exactly the effect of this Sub-section, and we ought to have some justification for it from the Government. It deals with the deduction of Income Tax from dividends when they are paid. That deduction now has to be made on the Income Tax at the standard rate current at the time that the dividend is paid, and is not dependent on the period in which it is earned, or anything of that kind. The result is that just about the time when the Chancellor of the Exchequer opens his Budget, there may be a number of dividends just about to be paid, from which there might have been deducted what will turn out ultimately to be either an over-deduction or an under-deduction as the result of a change in the standard rate of Income Tax.
This Sub-section provides for the case where there has been in these circumstances an over-deduction. As the law would stand without this Sub-section, that over-deduction would have to be made good ultimately by the company to the shareholder. This Sub-section proposes that the company shall not be under any liability to make good an over-deduction to the shareholder who receives the dividend. It says that the matter shall be disposed of by making a less deduction from the following dividend, and it expressly says that there shall be no liability to the actual recipient
of the dividend from which the over-deduction was made. Take the case of stocks or shares which are being constantly dealt with and in which there is a free and big market. Very often the holder of the stocks or shares, at the time when the over-deduction is made good, will be a different person from the holder of the stocks or shares against whom the over-deduction was made. It is all very well from the point of the Revenue to say that if too much is deducted at one time, the company will take so much less the next time when they come to deduct tax; but it is not by any means the same thing for the taxpayer who finds himself faced with a proposal that, when too much has been taken away from him, the restoration may have to be made good to some totally different person.
That is the effect of this proposal, and the Financial Secretary will agree that I have stated it quite clearly. If the stocks or shares were always held by the same person, there would be no harm. If, for instance, the Financial Secretary has a respectable little holding of 10,000 shares in the Shell Transport Company, on which he gets a dividend about the middle of April, and has a deduction at the rate of 4s. 6d. made against that dividend; and he subsequently sells the shares, and it turns out that the tax deducted should have been only 4s., because, owing to the advent of a Conservative Government, the tax has been reduced by 6d., then the Financial Secretary would lose that 6d. Perhaps it would be poetic justice that he, as a Member of the present Government, should have to suffer and pay the extra 6d. which he helped to put on, but I have no doubt that he would feel reason to complain, because it would be rather hard that the 6d. too much which had been taken from his dividend should, instead of being restored to him, be restored to the right hon. Gentleman the Member for Epping (Mr. Churchill), shall we say, who had bought the shares in the meantime. Unless there is some strong reason for this Sub-section, or some different explanation to be given for it, I urge that it should be left out, and that, if a company make an over-deduction, it should be the duty of the company to repay it to the particular shareholder from whose dividend it was taken. It would not cause a vast amount
of trouble, and a little trouble is worth undertaking for the sake of justice and fairness.

Mr. A. M. SAMUEL: I am induced to offer a few observations on this Clause because, when it was introduced on the Budget Resolutions, I dealt with it, and certain explanations were given to me by the Financial Secretary. I put down at the time certain things that he said. He may have made a mistake, but evidently what he told us was so confused, that I must join with my hon. Friend and ask him to explain at considerable length how this Clause will work. I am quite clear about the Clause so far as it deals with ordinary shares. What it means is this: If a man has had declared to him a dividend of £100 gross, and he has received £80 net with a deduction of 4s. in the £ Income Tax—owing to the fact that the company could not deduct at the rate of 4s. 6d. because it was a physical impossibility, the Budget Resolution not having been passed—when he returns his income for the purposes of Surtax, he must not return his income gross as £100, but at something like £103 4s. 6d. That is to say, he must calculate every pound as £1 0s. 7¾d., 3¼ per cent. more. I am clear about that. I know that for the purposes of Surtax that is the case. That deals with Sub-section (3) of the Clause which relates to ordinary shares. I am not going to ask any questions about that on this Amendment. I wish to deal with the first part, and I take it, Mr. Young, that you would like us to deal with the general question somewhat on the lines of the last Clause, in which case I do not think I shall need to move my own Amendments.

The CHAIRMAN (Mr. Robert Young): This Sub-section deals with preference dividends.

Mr. CHARLES WILLIAMS: On a point of Order. Shall we be able to discuss the proviso to paragraph (b) on which I have an Amendment? I take it the present discussion will not prevent us from bringing forward the points we wish to make on further Amendments, providing those Amendments are called.

The CHAIRMAN: The Amendment before the Committee is to leave out Sub-section (1). I have not selected any of the other Amendments.

Mr. SAMUEL: The reason I am not dealing with ordinary shares in this particular discussion is because I understand the points I am now raising have nothing to do with ordinary shares. Therefore, I wish to save the Financial Secretary the trouble of explaining the differences in detail in regard to the two classes of shares. It is in regard to the preference shares that I am in doubt. If a deduction at 4s. 6d., which is the ruling rate, is made three weeks or so prior to a Budget Resolution bringing about a reduction of the Income Tax to, say, 3s. 6d., the deduction must be made from the tax charged to the preference shareholder on the occasion of the next payment of preference dividend within one year. What happens if no preference dividend is ever again declared? Suppose the company goes into liquidation? A certain overcharge has been made. Who will get the refund? Or who would get the refund five years hence if they were cumulative preference shares? I have written out these points, and I will hand them to the Financial Secretary, so that he may see exactly what they are. The point is that at present there is a limit of one year from the passing of the Act. On the Report stage of the Budget Resolutions the Financial Secretary told us:
The rule under paragraph (a) is that when it comes to the autumn dividend"—
He made use of the word "autumn"—
the taxpayer will receive less than £5 with 4s. 6d. subtracted.
What did he mean by that? The taxpayer does not receive £5 with 4s. 6d. subtracted. He misled me. For his autumn dividend the taxpayer will not receive "less than £5." What he will receive will be something less than £2 10s. He was dealing with a case of a person who holds £100 worth of preference shares and is entitled to £5 annual dividend, and he said that when the tax was 4s. in the £ one-fifth of that was deducted and he would actually receive £4. Then he went on to say that when it comes to the autumn dividend, the taxpayer would receive less than £5 with 4s. 6d. subtracted—
in order to make up for the fact that he has received too much in the Spring."—[OFFICIAL REPORT, 6th May, 1930; col. 834, Vol. 238.]
The whole thing is in a muddle, and I hope the Financial Secretary will say what he means.
There is one other poinnt on which we require information. If nothing by way of interest is paid for more than 12 months after the passing of the Act, at what rate of tax is an adjustment under this Clause to be made if the Income Tax rate has fallen? It is said that on any sale of the stock in the meantime the buyer will take into consideration the benefit or discount inherent in the value owing to some reduction of or addition to the Income Tax. I would ask the attention of the Attorney-General to this point. If Preference shares have been sold after one-half year's incorrect deduction has been made, may we take it for certain that any adjustment of the Income Tax will affect the owner of the shares at the time the adjustment is made? If so, is it to be assumed that the new owner has taken that into account when he was calculating the price at which he should buy the shares from the late owner? In that case I would ask how the new buyer can foresee what the tax will be at the time when he buys from the late owner? These are points which will have to be cleared up. They have not been foreseen by the Treasury or by the hon. and learned Attorney-General. We do not wish to be obstructive on this Clause, but this is a matter which ought to be explained to us, and we will, so far as we can, give any assistance in the adjustment of what is, I am certain, a hiatus in the provisions for the administration of the law.

Mr. OLIVER STANLEY: I am afraid it will be impossible for me to follow the argument of the hon. Member for Farnham (Mr. A. M. Samuel), which I confess I fail to understand, but I wish to deal briefly with a point which I think raises a real question of principle in connection with this Sub-section, and that is that a repayment in respect of over-deduction of tax is made without any references at all to the equity of the situation. It is definitely laid down that the benefit of this Clause shall never inure to the person who was the subject of the original hardship, though presumably this Clause is intended to help him. If I have suffered an over-deduction of tax from the dividend on some shares,
and if in the ensuing 12 months I am forced to sell those shares, the benefit which inures under paragraph (b) comes not to me, who suffered the over-deduction, but to the person who bought from me, the man who happens to hold the shares at the particular time when the money is repaid. The Clause does not even say that the benefit shall come to the man who holds the shares at the next dividend payment, if the dividend is passed in that year; nothing is laid down as to how the amount is to be made up beyond the limit of one year. It seems to me that the principle, if we can call it a principle, underlying this arrangement, is the same vicious principle which underlay the Clause which we have just finished discussing, and that is that we are doing these things to fit the machine and without regard to the equity of the proceedings.
The only possible reason that can be put forward for not giving this benefit to the original holder is that the procedure prescribed is easier from the point of view of the Exchequer, and of the company as the agent of the Exchequer. But it is quite wrong that we should allow the interests of the machinery to stand in the way of doing justice to the taxpayer. The Exchequer, which is the machinery, exists for the benefit of the taxpayer and not the taxpayer for the benefit of the machinery. Whatever the difficulties may have been in the last Clause, in this particular case I cannot see what obstacles there can be in the way of doing justice to the taxpayer. The period for the repayment is limited to one year. Surely every company must know the state of its register at the last dividend payment, and it would not be putting any intolerable hardship on the company, and would only be doing justice to the taxpayer, if this provision were so altered that the benefit of this repayment were made to inure to the benefit of the person who originally suffered from the over-deduction, that is, the person who was the holder of the shares when the dividend was paid. Owing to the way in which the question has been put it is impossible for me to hand in any manuscript Amendment to secure the carrying out of this intention, but I hope to be able to put forward an Amendment on Report stage and I trust that the hon. Gentleman wilt try to meet us.

The FINANCIAL SECRETARY to the TREASURY (Mr. Pethick-Lawrence): There has been considerable misconception, particularly in the mind of the hon. Member for Westmorland (Mr. Stanley) as to the object of this Clause. It is not the object of the Clause to secure any gain to the Exchequer. The company pays the tax to the Exchequer, and therefore this is not a matter between the taxpayer and the Exchequer, but it defines the relationship between the taxpayer and the company, and it has been drawn up for the convenience of the company.

Mr. STANLEY: The company as agent for the Exchequer.

Mr. PETHICK-LAWRENCE: The hon. Member seemed to suggest that in order to oblige the Exchequer we were doing something which would create a great deal of difficulty. That is not the case at all. The Exchequer is perfectly satisfied with the arrangement by which it receives the money from the company, but difficulties have arisen in regard to cases where the dividend warrants are made out subsequent to the end of the financial year but before the Budget statement has been made, and it is with a view to meeting that point, and after full consultation with the companies, that this particular scheme has been brought forward. What is the scheme? The hon. Member for Farnham (Mr. A. M. Samuel) did not seem to me quite to understand what the scheme was. [Interruption.] I said the right hon. Gentleman did not seem to understand it. If he did, I fail to understand what his point is. He took me to task for some words I had used on a previous occasion when this subject was under discussion. What are the facts? There is a spring dividend and an autumn dividend. I spoke about a £5 autumn dividend on 5 per cent. preference shares and I was speaking about £200 preference shares. I was thinking of 5 per cent. and a half-year's dividend on £200. Putting the Income Tax aside on a £200 preference share at 5 per cent., a man will receive £5 in the spring dividend and £5 in the autumn dividend. Where the Income Tax remains standing at 4s. 6d. that man will receive a spring dividend of £5 less 4s. 6d. in the £ and in the
autumn he will receive £5 less 4s. 6d. in the £. Supposing the tax were reduced from 4s. 6d. to 4s., then it is the reverse of the case I was stating When the Financial Resolutions were under discussion. In the case of payment in the spring the warrant was made out before the change was announced and the owners of preference shares receive in the spring £5 less tax at 4s. 6d. in the £. The tax has been reduced and they ought to have only 4s. in the £ deducted from that particular dividend.
Somehow that has got to be made good. The simplest method was to make it good on the next occasion when the tax became due and that is done by deducting not 4s. 6d. in the autumn, and not even 4s., because that is what he ought to have deducted on both dividends. As a matter of fact, this man had too much deducted on the first occasion in the spring, and therefore he will have less than the normal amount of tax of 4s. deducted in the autumn, and it will be somewhere in the neighbourhood of 3s. 6d. and the following year he will go back to the 4s., which is the normal amount. Those are the facts, and as long as the same holder is in possession of the shares all the time, I think it will be generally agreed that that is the simplest way to deal with the matter, and that is the view of the company.
The hon. Member for Watford (Sir D. Herbert) asked about the case where a man disposes of his shares during the course of the half-year. The proposal is that, in spite of that, the benefit of the additional reductions shall go to the holder of the preference shares in the autumn. It may be said that this is very unfair. It may be said that you have taken away more than you ought to have done, and that you are giving something extra to the autumn holder. The answer to that is that at the time when the March holder sells his shares to the autumn holder, the change in the rate of interest has been known, and the fact that an additional payment will be made will be taken into account in the price of the shares. We are all accustomed to the shares being sold cum dividend or ex-dividend where the dividend is due to be paid or to the buyer or the seller. In this case there will be a very small additional effect produced in addition to the effect of the dividend having to be
paid at a certain time, and there will be a small additional effect by this excess of tax having to be refunded, and that will be taken into account in the price of the shares. It was the opinion of those who were anxious that this change should be made that it should be made in that way, and it is believed that by an alteration in the price no injustice will be done between the two different shareholders. Another point raised was that if there was no autumn dividend the matter would be held up. If hon. Members will refer to Clause 11, Sub-section (1, b), they will find the following words:
Provided that the foregoing provision shall not authorise the retention of any part of the amount over-deducted for more than one year from the passing of the Act so imposing the tax.
So that where the autumn interest is not paid and a full year elapses, then the direct method of paying back to the individual shareholder will be effected instead of the method proposed in this Clause.

Mr. A. M. SAMUEL: What becomes of the money?

Mr. PETHICK-LAWRENCE: I am not quite clear what the hon. Gentleman means. Our proposal is perfectly straightforward. The tax is paid direct by the company, and the company retains a larger amount of money than it otherwise should do. The proposal of this Sub-section is that it should refund that money to the preference shareholders in the autumn, but if there be no autumn dividend, in this particular part of Subsection 1 (b) it is provided that the company shall not hold the money indefinitely, but shall refund it to the preference shareholders direct.

Mr. SAMUEL: Would it be refunded in the price? That is what we want to know.

Mr. PETHICK-LAWRENCE: I think it is perfectly clear that we are dealing only with preference shareholders who have received the wrong dividend in the spring of the year.

Sir NAIRNE STEWART SANDEMAN: Does the Financial Secretary mean that the Government are getting the use of this extra 6d. for six months?

Mr. PETHICK-LAWRENCE: The Government are entirely unaffected by that change, and if anybody gets the benefit it is the company. The amount is comparatively small, and therefore I think it is not unreasonable that the method we are suggesting should be adopted. I think I have now explained this matter to the satisfaction of the great bulk of hon. Members, and I hope that this proposal which has been put forward by the companies will be allowed to pass.

Mr. MARJORIBANKS: I think the remarks of the Financial Secretary will have struck many Members of the Committee as a sort of elaborate joke on the public and the Committee, because it appears to contemplate a reduction of taxation. I should have thought that the time to introduce elaborate proposals of this kind would be when there was some prospect of lower taxation, and at present there is no such prospects whatever. It seems to be that it is quite unnecessary to encumber the Statute Book with provisions to cover such a very unlikely eventuality, and one wonders why such a provision should have been brought forward, who proposed it, and what is the use of it.
If the Chancellor of the Exchequer contemplates lowering taxation, now is the time to come forward and say so. I am sure that a proposal of that kind would be received with acclamations by my hon. Friends on this side of the Committee. In the meantime, we have to consider this complicated Section with no possible hope of it ever coming into effect. It is on the face of it a boon to the company and a boon to the taxpayer. I think we may regard it in an attitude of timeo Danaos et dona ferentes. When one sees a concession to the taxpayer, one frequently looks for the injustice which will inevitably follow. With the first part of the Sub-section I have comparatively little quarrel, because I see very little new law in it. If the Attorney-General can see any new law in sub-paragraph (i), I should be glad to hear his explanation. The only thing that I can see is that this Sub-section has not been very carefully drafted. I notice that Rule 20 of the General Rules of Income Tax are mentioned in Sub-section (2) of this Clause. Rule 20 is as follows:
The profits or gains to be charged on any body of persons shall be computed in accordance with the provisions of this Act on the full amount of the same before any dividend thereof is made in respect of any share right or title thereto, and the body of persons paying such dividend shall be entitled to deduct the tax appropriate thereto.
I have read that rule and there is nothing there with regard to preference dividends, and I would like the Financial Secretary to explain why he has selected preference dividends only. Has the Stock Exchange been consulted on this matter? This may be a minor point, but I think it is one which has so far escaped the investigation of hon. Members opposite. There is no inherent justice up to now, and the position is similar to that which the late Mr. Thomas Gibson Bowles illustrated by bringing a test case and causing an Act of Parliament to be passed to put it right. I cannot see any new law until we get to Sub-section (1, d) and then we get the first injustice.
I would like the Members of the Committee to understand clearly that by Statute merely for the convenience of the registrars of companies an injustice is being perpetrated by withholding money from the shareholders for a whole year. That cannot be right in equity or in justice. It can only be right as a matter of convenience, and it is for the Financial Secretary to satisfy the Committee that such a Clause was necessary. We must never lose sight of the fact that this Clause will never come into operation as long as we have a Socialist administration and it clearly contemplates a Conservative administration. But, nevertheless, we in this Committee must consider this Clause as if the Government really meant business.
Is the Financial Secretary satisfied that the convenience of the matter justifies this change which is an undoubted injustice to every single holder of stock in this country. It is, of course, a comparatively minor injustice, because the money will eventually go to the person who held the shares, but in Sub-section (1, c) there is the real injustice which was disclosed by my hon. Friend the Member for Westmorland (Mr. O. Stanley). It provides that the money shall go to a person who has really no right to it whatever. That cannot be right, although it may be justified on the score of convenience. I know that companies have
been bombarded with disputes and re quests on this matter, and no doubt it will be very convenient to company registrars in future not to be bothered with disputes of this kind, but it is their business to look after these disputes, and it is within the competence of the ordinary common law of England to right these disputes. There is no reason why the House of Commons should make statutory an injustice of this kind, and then leave it to the unfortunate seller to put the matter right. The hon. Gentleman says that those who are familiar with the usual procedure of buying and selling "ex dividend" and "cum dividend" will readily understand this matter, but in this case the sum will be far less, and it may easily escape notice. It will be so small that the ordinary arrangements of the Stock Exchange will not pay any attention to it. De minimis non curat Stock Exchange. The hon. Gentleman's answer may have been logical, but it was specious, and, of course, entirely divorced from the realities and probabilities of the case; and the fact remains that this injustice, this departure from equitable principles, is to be put upon the Statute Book.
There are two other matters which it is essential to discuss if it is desired to make this Clause a reasonable one. Subsection (1, c, i) says that the amount made good shall
in the case of an over-deduction which is made good under paragraph (b) of this Sub-section ensure to the benefit of the person entitled to the payment on the occasion on which the over-deduction is made good.
That seems to me to apply to every deduction that could take place, and I shall be very pleased if the hon. Gentleman can show me how paragraph (ii) comes in, which says that the amount shall
in any other case enure to the benefit of the person entitled to the security or share in question at the date when the amount is made good.
That seems to me to be mere surplusage; I do not see what case it covers. It seems to me that paragraph (i) covers every situation that could arise, and I do not see what persons the umbrella of paragraph (ii) covers at all. Finally, after paragraphs (i) and (ii), we have the words:
and not in either case.
In connection with these words, the words
in any other case
in paragraph (ii) do not make sense. It is not a question of two alternatives, but of many alternatives. This, however, is perhaps a drafting point.
To recapitulate my grievances against Sub-section (1), I do not know whether paragraph (a) is confined to preference dividends—certainly Rule 20 is not; I think that a minor injustice occurs under paragraph (b), and a great injustice under paragraph (c), merely, in both cases, for the convenience of registrars of companies; while the last eight lines of the Sub-section are extremely obscure and unintelligible. In view of this, I think that the hon. Gentleman ought to explain to the Committee in what secret chamber these paragraphs were devised. I think it is clear that they were devised not by any Government Department, but by some private interest, and I think the Committee is entitled to know what private interest has devised this obscure and unintelligible wording, and what principle it attempts to express.

Major NATHAN: I cannot quite share the apprehensions of the hon. Member for Eastbourne (Mr. Marjoribanks). He suggests that the right to repayment of the over-deduction will not be reflected in the price, but I am sure it will be generally agreed that the public is not so gullible as that, and that even the smallest differences in value are reflected in market prices. Let it be remembered that market prices, in reality, are not made by the public, who may be uninstructed in these matters, but by jobbers and brokers who have a very keen eye to the most minute differences in value between one security and another. On the score of injustice in connection with this over-deduction, I find myself in agreement with the Financial Secretary. My object in rising is not to criticise the provisions of this Subsection, beyond expressing my apprehension at the complex terms in which the law is being expressed, but rather to address myself to a point some part of which was made by the hon. Member for Eastbourne. I am not criticising, but am asking for information.
Sub-section (1, a) makes legal any deduction under Section 2 of the Statute in question. Sub-section (1, b) states that
any over-deduction to be made good under that Section shall be made good in a certain manner. Sub-section (1, c) deals with an entirely different subject-matter, being directed, as I understand it, to indicating to whom the over-deduction is to be made good, and here I find myself for the moment in agreement with the hon. Member for Eastbourne. I am quite unable to understand what the words of paragraphs (i) and (ii) mean, while the words
and not in either case
seem to me to carry the matter no further, but to only confuse the situation. The matter, however, does not end there, and I think that the hon. Member for Eastbourne might have pursued his interesting argument rather further. The repayment under paragraph (i) is to enure to the benefit of the person entitled to the payment on the occasion on which the over-deduction is made good, but I would ask, what is the definition of the person entitled to the payment on the occasion on which the over-deduction is made good? As to the statement in paragraph (ii), that
in any other case"—
if there be any other case—the payment is to
enure to the benefit of the person entitled to the security or share in question at the date when the amount is made good,
I do not understand whether
the person entitled to the security or share in question at the date when the amount is made good
is the same person as the person referred to in paragraph (i), thought I suspect that he is. Would the Financial Secretary say who is the person referred to in paragraph (i), and how he differs from the person referred to in paragraph (ii)? The hon. Gentleman, in his reply to the hon. Member for Farnham (Mr. A. M. Samuel), said that over-deductions would be made good to the holder who had suffered over-deduction if he still retained the shares when the next dividend fell due, but I take it that the words:
not in either case
mean, not in the case of any over-deduction, because paragraph (c) refers to any over-deduction which relates back to paragraph (b), which covers the whole subject-matter of the Clause. If I understand the matter correctly, the
original holder of the shares, whether he still retains them or whether he has parted with them, is not to be entitled to the benefit of the deduction. That is what the Sub-section says in plain terms. The Financial Secretary said that, if the original holder has not parted with the shares, he will receive the money back when it is made good on his next dividend payment, but the original holder is excluded from the benefit of any repayment by the words to which I have just referred. Paragraph (b) refers to the manner in which any over-deduction is to be made good, and paragraph (c) refers to the person to whom it is to be made good; and in paragraph (c) it is specifically stated that, to whomsoever it may be made good, the one person to whom it is never to be made good is the original holder. Where, under Sub-section (1), in view of this phraseology, does he obtain the right to repayment?

7.0 p.m.

The ATTORNEY-GENERAL (Sir William Jowitt): I quite agree that this Clause is complicated and that the drafting needs to be looked into very carefully. I think, if I might say so, that the hon. Member for Eastbourne (Mr. Marjoribanks) did not state the matter accurately when he said that it did not involve a change in the existing law.

Mr. MARJORIBANKS: I did not say so. I asked the hon. and learned Gentleman what the meaning of the changes was.

The ATTORNEY-GENERAL: It was quite unnecessary for the hon. Member to rise to a point of Order. I would have given way. I understood him to say that there was no change in the existing law. If he did not say so but asked for information, I will tell him that I think I am right in saying that each of these Sub-sections does effect a change. In (1, a) the change is in that it gives you a fixed period of one month which is not liable to be cut down as under the Act of 1913. The alteration in (1, b) is much more important because under (1, b) the company are entitled to retain the excess deduction for a period of time therein specified. But for the alteration of the law made in (1, b), they would have no power to do that and no defence to an action for retaining it. Again, in (1, c), you have a complete
change in the law, because what is contemplated is that you shall pay the excess deduction you have taken from A and, instead of paying it to A, you shall pay it to B.

Mr. MARJORIBANKS: As far as I am concerned, I made it clear in regard to (b) and (c) that there were, in fact, drastic changes in the law containing great injustices.

The ATTORNEY-GENERAL: I am sorry I misunderstood the hon. Member. I cannot say I appreciate what the injustices are, because it seems to me, having only the qualification of a lawyer—business men may correct me—that this matter must be reflected in the price of the share and that an injustice that might appear at first blush would be put right, because the purchase price of the share, if there had been an over-deduction, would be higher because the purchaser would know that, when the next dividend came, not only would he get such dividend as there might be but, as an added bonne bouche, such deductions as were over-deducted before. I aim asked about the distinction between (i) and (ii) of paragraph (c). When we learned logic, we used to learn that everything in the world is either a grid iron or not a gridiron. Everything in the world is either an over-deduction which is made good under paragraph (b) or which is not made good under paragraph (b). Consequently, you get your two categories. The first category of those made good under paragraph (b) refers to the method by which you do it. If you make it good under paragraph (b), you have got the method of taking less on the second occasion to make good what you over-deducted on the first occasion. Now (ii) refers to "any other case," which includes the case where you simply pay without waiting for a further dividend and simply send round to your various shareholders the excess deductions you have made. The company may elect to pay them over promptly to shareholders. If it does that, it comes under (ii) and the words "in any other case."
The hon. Member who spoke last raised one point which led me to say that the drafting needs to be carefully considered. I am not myself certain that the Courts would have adopted that construction of those words:
To the benefit of the person entitled to the payment on the occasion on which the over-deduction is made good.
The whole framework of the Clause draws a distinction between two people, the person entitled to the benefit at the time the deduction was made as opposed to the person entitled to the share at the time of the putting right of the excess deduction. Those are the two people you are contrasting and you are saying in paragraph (c) that in any other case the amount made good shall inure to the benefit of the person entitled to the security or share at the date when the amount is made good and not to the person entitled to the share when the original deduction was made. I should suggest, as a matter of construction to the hon. Member, that it is a matter of differentiating, and, when you say no to the second man you are emphasising that you must take the first. If there has been no change in the ownership of the share, it is obvious that the Court will say that the man who all along has been owner will not be disqualified from receiving that which is obviously his as shown by the words of the original Section. I will tell the hon. Member that I will take an opportunity of seeing the Parliamentary draftsman about it and pointing out the difficulties he has pointed out to me and, if the draftsman thinks better words can be found, I shall ask him to put it right on Report stage.

Mr. ALBERY: I would like to put one further question to the hon. and learned Gentleman. In further explanation of what he said, will he tell us how the difficulties which this very complicated Clause seeks to overcome were met in the past? If they were not met, how did this arise?

The ATTORNEY-GENERAL: I understand that the companies had to pay it back and that it was by reason of the difficulties the companies experienced on these occasions that they made representations that some such arrangement as this should be made. It is not a matter for the revenue; it is simply a matter for the companies to enable them to make a business adjustment.

Sir L. WORTHINGTON-EVANS: There is one point I would like the hon. and learned Member to elucidate a little
further. Dealing with (c, ii), he said that the company was not bound to keep the tax for a year, but they might at any moment repay if they chose. But when he was dealing with (c, i), he said that the value of the tax which would ultimately come to the shareholder would be reflected in the price of the share, that the share might be cum-dividend and it might also be cum-tax. That is the argument. How can that be if the company may at any time repay the tax to the previous holder? That is our point. The share is cum-dividend because the date of the dividend is known. Within a few days or even as much as a month before in respect of Government stocks, it is quoted ex-dividend, but up to that point it is cum-dividend. There is a fixed time in which you can make a stock cum-dividend or ex-dividend because you know when the dividend is going to be paid. How can these shares have a regular price cum-tax when you do not know whether the company is going to repay the tax or not? I do not see how the hon. and learned Member can get out of it. It is really important. If you do not reflect the value of the tax in the price, you are taking it from one man whose property it is and transferring it to someone else whose property it is not. That is what you are doing unless it is reflected in the price which the seller gets. Your answer is that it is reflected in the price which the seller gets. If it is, then of course there is no injustice to either of them, but I undertake to say that it never will be reflected in the price. Odds and ends of tax, a relatively small percentage of the dividend, cannot be reflected in the price. How can it be when you have not a fixed date for the repayment of the tax, and when at any moment the tax may be repaid?

Mr. PETHICK-LAWRENCE: The case of (c, i) provides for making good an over-deduction by a company in the dividend. Where in the subsequent dividend the over-deduction is made good, then under (c, i) any return of over-deducted tax is paid to the man who is entitled to the dividend. Therefore, the amount is made good to the man who is entitled to the second dividend.

Sir L. WORTHINGTON-EVANS: Suppose he sold the share?

Mr. PETHICK-LAWRENCE: That is the case I have already answered—the man who has overpaid a tax sells his share to another man. That man when he gets his next dividend is entitled to have that amount made good. That being so, the first man selling to the second is entitled to charge some more for the shares in consequence of that tax. I see no difficulty in that.

Sir L. WORTHINGTON-EVANS: That is all right up to that point, but the learned Attorney-General pointed out, dealing with (c, ii), that the company was not bound to wait and repay the tax to the original owner or to the holder with the next dividend. They can repay it at any time. I ask the hon. Gentleman how it can possibly be reflected in the price when the seller at the time he sells and the buyer at the time he buys do not know whether it is cum-tax or not cum-tax.

Mr. PETHICK-LAWRENCE: Whether the company chooses to pay it or otherwise, the benefit enures to the holder after the sale to which the hon. Member has referred. It is reflected in the price, because the buyer gets the benefit of this reduction. Whatever method is adopted, the buyer gets the benefit of this repayment, and the object of paragraph (c) is to ensure that the buyer in all cases gets the benefit of the repayment. The difference between (i) and (ii) is that in the case of (i) it can be paid at the time the second dividend is paid and in the case of (ii) it can be paid at any other time. In every case, the benefit accrues to the holder who is entitled to hold the shares or to get the dividend on the shares.

Major GEORGE DAVIES: By this Clause we are deliberately making an injustice by Statute, and we satisfy ourselves by saying business procedure is going to put it right. A great many of us have grave doubts, in the first place, whether you can always rely on business procedure to put right what we may do wrong and, in the second place, whether the explanations which have been given are going to cover the situation. My right hon. Friend has pointed out the difficulties of quoting ex and cum if you do not know the exact date. There may be an explanation, but in a large number of cases I think the injustice will not
be reflected in the price, as in many cases small holders of shares who are not liable to Income Tax at the top rate get it deducted at the source, and it is not worth their while to collect it, and the Treasury wins. That is a case which it is in the hands of the individual to adjust, but here we are putting on the Statute Book a piece of injustice. We are taking money away from someone who may have to pay it and giving it to someone who is not entitled to it, and we say, "Between you, you will straighten it out." Another question will arise when trustees have to pay interest or dividends to beneficiaries. If shares are sold ex-tax, or cum-tax, the price received is less than would otherwise be the case, because there has been this illegal deduction, and the trustees find that the capital of the estate is reduced by that amount, and it is not repaid to the beneficiaries but to some other purchaser, who gets it in the price.
That is another dilemma which arises out of the excellent desire of the Chancellor of the Exchequer to facilitate what we admit is a difficulty in the conduct of business if and when that blessed state may arise when we have a reduction of the standard rate of Income Tax. This Committee, and the community at large who are concerned in these things, will realise first that, however much we think we can rely on the stock markets to readjust things, we are not entitled to put on the Statute Book a manifest injustice. In endeavouring to do so, the Chancellor is raising a number of dilemmas which in the aggregate are of considerable importance and, in any event, are an unbusinesslike and improper kind of procedure for the Committee to mix itself up with.

Captain CAZALET: I think I understood the perfectly clear statements of the Financial Secretary and the Attorney-General so far as they went, but I do not think they answered my right hon. Friend's point. I should like to ask who has been consulted on the point. Have the Stock Exchange Committee or any business firm been consulted, and have they agreed that this is the best way of dealing with this highly contentious problem? The point my right hon. Friend raised was this: Before the Clause was introduced, a company had the right
to pay to the holders of shares, say in April, any reduction that there may have been in Income Tax. The case selected by my right hon. Friend was from 4s. 6d. to 4s. As I gather from the Attorney-General, a company under paragraph (b) of this Clause would have the right either to do the same as they have done up to now, that is, to send the warrant to the original holder in April, or to postpone payment and give it to the individual who happens to hold the shares in the autumn. If they have an alternative, how can the extra amount that is due in the autumn be reflected in the market price, because the company has the right at any time between the two dates to pay the individual shareholder?

Mr. PETHICK-LAWRENCE: The holder at the time they make the payment.

Captain GAZALET: They know who the holder is when the dividends are first sent out, but the shares may have changed hands five or six times in the meantime.

Sir D. HERBERT: On a point of Order. Did I understand you, Sir, to rule that one could not discuss on this Clause the question of deductions from ordinary dividends because the Resolution applied only to preference dividends?

The CHAIRMAN (Mr. Robert Young): That is so.

Sir D. HERBERT: May I ask whether you have considered that there are apparently two Resolutions on which this Clause is based and, unless I have made some very grievous error in my understanding of the Clause, it is intended to deal with ordinary dividends as well as preference dividends. I may now confess that I put down my first Amendment because at first sight I did not think there was a financial Resolution to justify the subsequent ones.

Mr. PETHICK-LAWRENCE: The question of dividends on other than preference shares is dealt with in Sub-section (3) and, therefore, I would ask you, Sir, to uphold your ruling. I agree that the particular Amendment to which the hon. Gentleman is referring only deals with preference shares but, when we come to Section (3), the question of ordinary shares can be raised.

The CHAIRMAN: The only question is that Sub-section (1) stands part of the Clause.

Sir D. HERBERT: I apologise. I was under the impression that by arrangement we were having a discussion on the Clause generally.

Mr. C. WILLIAMS: The Attorney-General said everything was either a grid-iron or it was not, and he went on to explain that apparently one part of paragraph (c) belonged to one side or the other. Where I am in trouble is that in paragraph (c) apparently there are three things, which are (1) grid-irons, (2) not grid-irons, and (3) this alternative. In the first place the paragraph refers to the people who are entitled to these dividends on the occasion of which the over-deduction is made good. That is one side of it. In paragraph (ii) you come to the date at which it is made good. Apparently those are the two different kinds which you expect. Then you come to what apparently is the gross unfairness. You are apparently not dealing either with the date when deduction is made—apparently that is ruled out, and also the date on which the amount is made good—but you go on and say:
And not in either case to the benefit of the person entitled to the payment.
It is absolutely clear that in no circumstances can this payment be made to the person who is entitled to it. The Financial Secretary said in his opening remarks that this was done in the interest and by the advice of certain companies. Because certain companies have made representations to the Exchequer that these dividends should be paid in a particular way, why should we lay it down that under no circumstances are the people entitled to payment to be allowed to have it? Anyone may have the dividend except those who are entitled to it. This is one of those curious things that emerge every now and then from the minds of the present occupants of the Treasury Bench. Whoever else may have a thing, the person who has a right to it certainly shall not have it. Give it to anyone else, but never to the person who is justifiably entitled to it.
Let me go a litle way back, to the proviso to paragraph (b). There again you come to a very interesting and curious technical position. It lays down
clearly that the foregoing provision shall not authorise the retention of any part of the amount you have deducted for more than one year after the passing of the Act so imposing the tax. I should like to ask who does get it in that one year. If it means that this can only go on for a year and then there will be a change, as some of the earlier speakers assumed, I could understand it, but surely that is not the only meaning that can be read into these words. I should like to know why you have laid down a year and not any other period. It does not seem to cover the Finance Act or anything else. It seems just to have arrived there in a curious way. There is a further point that wants explanation. Paragraph (a) lays down a period of a month. On what principle is that done? Apparently this is new law. If it is old law, the period might have been less. We are entitled, when we are making new rules and regulations of this type, to know on what principle this is laid down. At the beginning of the Sub-section references are made to rule 19 of the General Rules for the payment of interest, and also to Rule 20. It is exceedingly difficult for some of us who are not lawyers to understand the various rules that come up.
On an occasion such as this it is not in the public interest that we should have these rules quoted unless we are given an explanation as to how they are to be used. There was an interesting

discussion between the Attorney-General and my hon. Friend the Member for Eastbourne (Mr. Marjoribanks), who between them knew a good deal about the rules, but they differed as to the rules in this particular Sub-section. Speaking as an ordinary Member of the Committee, I do not think that after the explanation which has been given, any of us could give advice to our constituents as to how much Income Tax any of them would have to pay under the particular Sub-section. The fact remains that, rein regard to the Sub-section as drafted it has been definitely stated that it is the intention to create an injustice. For that reason I hope that as far as my party are concerned we shall go into the Lobby against the proposal, unless the Chancellor of the Exchequer makes a very good and clear explanation. I do not wish to keep the Chancellor of the Exchequer from addressing the Committee, but I should like to state the grave difficulty many of us find in explaining his attitude in the country. I feel sure that he will give an explanation which is simple, clear, and efficient.

Mr. P. SNOWDEN: rose in his place, and claimed to move, "That the Question be now put."

Question put, "That the Question be now put."

The Committee divided: Ayes, 247; Noes, 120.

Division No. 347.]
AYES.
[7.34 p.m.


Adamson, Rt. Hon. W. (Fife, West)
Carter, W. (St. Pancras, S. W.)
Gossling, A. G.


Adamson, W. M. (Staff., Cannock)
Charieton, H. C.
Gould, F.


Addison, Rt. Hon. Dr. Christopher
Chater, Daniel
Graham, Rt. Hon. Wm. (Edin., Cent.)


Aitchison, Rt. Hon. Craigie M.
Church, Major A. G.
Gray, Milner


Alexander, Rt. Hon. A. V. (Hillsbro')
Clarke, J. S.
Grenfell, D. R. (Glamorgan)


Ammon, Charles George
Cluse, W. S.
Griffith, F. Kingsley (Middlesbro' W.)


Arnott, John
Clynes, Rt. Hon. John R.
Griffiths, T. (Monmouth, Pontypool)


Aske, Sir Robert
Cocks, Frederick Seymour
Groves, Thomas E.


Attlee, Clement Richard
Cove, William G.
Grundy, Thomas W.


Ayles, Walter
Daggar, George
Hall, F. (York, W. R., Normanton)


Baker, John (Wolverhampton, Bilston)
Dallas, George
Hall, G. H. (Merthyr Tydvil)


Baldwin, Oliver (Dudley)
Dalton, Hugh
Hall, Capt. W. P. (Portsmouth, C.)


Barnes, Alfred John
Davies, Rhys John (Westhoughton)
Hamilton, Mary Agnes (Blackburn)


Batey, Joseph
Denman, Hon. R. D.
Hamilton, Sir R. (Orkney & Zetland)


Benn, Rt. Hon. Wedgwood
Dickson, T.
Harbord, A.


Bennett, Capt. Sir E. N. (Cardiff C.)
Dudgeon, Major C. R.
Hardie, George D.


Benson, G.
Duncan, Charles
Harris, Percy A.


Bentham, Dr. Ethel
Ede, James Chuter
Hartshorn, Rt. Hon. Vernon


Bevan, Aneurin (Ebbw Vale)
Edmunds, J. E.
Haycock, A. W.


Bondfield, Rt. Hon. Margaret
Edwards, C. (Monmouth, Bedwellty)
Hayday, Arthur


Bowen, J. W.
Edwards, E. (Morpeth)
Hayes, John Henry


Brockway, A. Fenner
Egan, W. H.
Henderson, Arthur, Junr, (Cardiff, S.)


Bromfield, William
Elmley, Viscount
Henderson, Thomas (Glasgow)


Brothers, M.
Forgan, Dr. Robert
Henderson, W. W. (Middx., Enfield)


Brown, Ernest (Leith)
Freeman, Peter
Herriotts, J.


Brown, Rt. Hon. J. (South Ayrshire)
Gardner, B. W. (West Ham, Upton)
Hirst, G. H. (York W. R. Wentworth)


Brown, W. J. (Wolverhampton, West)
Gardner, J. P. (Hammersmith, N.)
Hoffman, P. C.


Buchanan, G.
George, Megan Lloyd (Anglesea)
Hopkin, Daniel


Burgess, F. G.
Gibbins, Joseph
Horrabin, J. F.


Buxton, C. R. (Yorks. W. R. Elland)
Gibson, H. M. (Lancs, Mossley)
Hudson, James H. (Huddersfield)


Caine, Derwent Hall
Gill, T. H.
Hunter, Dr. Joseph


Cameron, A. G.
Gillett, George M.
Hutchison, Maj.-Gen. Sir R.


Isaacs, George
Morgan, Dr. H. B.
Smith, Ben (Bermondsey, Rotherhithe)


Jenkins, W. (Glamorgan, Neath)
Morley, Ralph
Smith, Frank (Nuneaton)


John, William (Rhondda, West)
Morrison, Herbert (Hackney, South)
Smith, H. B. Lees- (Keighley)


Johnston, Thomas
Morrison, Robert C. (Tottenham, N.)
Smith, Rennie (Penistone)


Jones, J. J. (West Ham, Silvertown)
Mort, D. L.
Smith, Tom (Pontefract)


Jones, Rt. Hon. Leif (Camborne)
Moses, J. J. H.
Smith, W. R. (Norwich)


Jones, Morgan (Caerphilly)
Mosley, Lady C. (Stoke-on-Trent)
Snell, Harry


Jones, T. I. Mardy (Pontypridd)
Mosley, Sir Oswald (Smethwick)
Snowden, Rt. Hon. Philip


Jowett, Rt. Hon. F. W.
Muggeridge, H. T.
Sorensen, R.


Jowitt, Rt. Hon. Sir W. A.
Nathan, Major H. L.
Stamford, Thomas W.


Kedward, R. M. (Kent, Ashford)
Naylor, T. E.
Strachey, E. J. St. Loe


Kennedy, Thomas
Noel Baker, P. J.
Strauss, G. R.


Kirkwood, D.
Oldfield, J. R.
Sullivan, J.


Knight, Holford
Oliver, George Harold (Ilkeston)
Sutton, J. E.


Lambert, Rt. Hon. George (S. Molton)
Oliver, P. M. (Man., Blackley)
Taylor, R. A. (Lincoln)


Lansbury, Rt. Hon. George
Owen, H. F. (Hereford)
Taylor, W. B. (Norfolk, S. W.)


Lathan, G.
Palin, John Henry
Thorne, W. (West Ham, Plaistow)


Law, Albert (Bolton)
Paling, Wilfrid
Thurtle, Ernest


Law, A. (Rossendale)
Perry, S. F.
Tinker, John Joseph


Lawrence, Susan
Pethick-Lawrence, F. W.
Toole, Joseph


Lawson, John James
Picton-Turbervill, Edith
Tout, W. J.


Lawther, W. (Barnard Castle)
Pole, Major D. G.
Townend, A. E.


Leach, W.
Potts, John S.
Trevelyan, Rt. Hon. Sir Charles


Lee, Frank (Derby, N. E.)
Price, M. P.
Vaughan, D. J.


Lee, Jennie (Lanark, Northern)
Ramsay, T. B. Wilson
Viant, S. P.


Lees, J.
Richards, R.
Walkden, A. G.


Lewis, T. (Southampton)
Richardson, R. (Houghton-le-Spring)
Walker, J.


Lindley, Fred W.
Riley, Ben (Dewsbury)
Wallace H. W.


Lloyd, C. Ellis
Riley, F. F. (Stockton-on-Tees)
Wallhead, Richard C.


Logan, David Gilbert
Ritson, J.
Watkins, F. C.


Longbottom, A. W.
Romeril, H. G.
Watson, W. M. (Dunfermline)


Longden, F.
Rosbotham, D. S. T.
Wellock, Wilfred


Lowth, Thomas
Rowson, Guy
Welsh, James (Paisley)


Macdonald, Gordon (Ince)
Russell, Richard John (Eddisbury)
West, F. R.


MacDonald, Rt. Hon. J. R. (Seaham)
Salter, Dr. Alfred
Westwood, Joseph


MacDonald, Malcolm (Bassetlaw)
Samuel, Rt. Hon. Sir H. (Darwen)
White, H. G.


McElwee, A.
Sanders, W. S.
Whiteley, Wilfrid (Birm., Ladywood)


McEntee, V. L.
Sandham, E.
Wilkinson, Ellen C.


McKinlay, A.
Sawyer, G. F.
Williams, David (Swansea, East)


Maclean, Sir Donald (Cornwall, N.)
Scrymgeour, E.
Williams, Dr. J. H. (Lianelly)


McShane, John James
Scurr, John
Williams, T. (York, Don Valley)


Malone, C. L'Estrange (N'thampton)
Sexton, James
Wilson, C. H. (Sheffield, Attercliffe)


Mansfield, W.
Shepherd, Arthur Lewis
Wilson, R. J. (Jarrow)


March, S.
Sherwood, G. H.
Winterton, G. E. (Leicester, Loughb'gh)


Marcus, M.
Shield, George William
Wise, E. F.


Marley, J.
Shillaker, J. F.
Wright, W. (Rutherglen)


Mathers, George
Shinwell, E.
Young, R. S. (Islington, North)


Matters, L. W.
Short, Alfred (Wednesbury)



Messer, Fred
Simmons, C. J.
TELLERS FOR THE AYES.—


Middleton, G.
Sinkinson, George
Mr. Allen Parkinson and Mr.


Milner, Major J.
Sitch, Charles H.
William Whiteley.


Montague, Frederick
Smith, Alfred (Sunderland)



NOES.


Acland-Troyte, Lieut.-Colonel
Cranborne, Viscount
Henderson, Capt. R. R. (Oxf'd, Henley)


Ainsworth, Lieut.-Col. Charles
Croft, Brigadier-General Sir H.
Herbert, Sir Dennis (Hertford)


Albery, Irving James
Cunliffe-Lister, Rt. Hon. Sir Philip
Hills, Major Rt. Hon. John Waller


Allen, W. E. D. (Belfast, W.)
Dalkeith, Earl of
Hoare, Lt.-Col. Rt. Hon. Sir S. J. G.


Atkinson, C.
Dalrymple-White, Lt.-Col. Sir Godfrey
Hurd, Percy A.


Balfour, George (Hampstead)
Davidson, Rt. Hon. J. (Hertford)
King, Commodore Rt. Hon. Henry D.


Balfour, Captain H. H. (I. of Thanet)
Davidson, Major-General Sir J. H.
Knox, Sir Alfred


Balniel, Lord
Davies, Dr. Vernon
Lamb, Sir J. Q.


Beaumont, M. W.
Davies, Maj. Geo. F. (Somerset, Yeovil)
Lane Fox, Col. Rt. Hon. George R.


Betterton, Sir Henry B.
Davison, Sir W. H. (Kensington, S.)
Law, Sir Alfred (Derby, High Peak)


Boothby, R. J. G.
Dixon, Captain Rt. Hon. Herbert
Leighton, Major B. E. P.


Bourne, Captain Robert Croft
Eden, Captain Anthony
Lewis, Oswald (Colchester)


Boyce, H. L.
Edmondson, Major A. J.
Long, Major Eric


Bracken, B.
Elliot, Major Walter E.
Maitland, A. (Kent, Faversham)


Briscoe, Richard George
Erskine, Lord (Somerset, Weston-s-M.)
Makins, Brigadier-General E.


Buckingham, Sir H.
Falle, Sir Bertram G.
Marjoribanks, E. C.


Bullock, Captain Malcolm
Ferguson, Sir John
Monsell, Eyres, Com. Rt. Hon. Sir B.


Burton, Colonel H. W.
Ford, Sir P. J.
Morrison, W. S. (Glos., Cirencester)


Butler, R. A.
Forestier-Walker, Sir L.
Nicholson, O. (Westminster)


Cadogan, Major Hon. Edward
Graham, Fergus (Cumberland, N.)
Nield, Rt. Hon. Sir Herbert


Carver, Major W. H.
Grattan-Doyle, Sir N.
O'Connor, T. J.


Cautley, Sir Henry S.
Greene, W. P. Crawford
Ormsby-Gore, Rt. Hon. William


Cayzer, Sir C. (Chester, City)
Grenfell, Edward C. (City of London)
Penny, Sir George


Cazalet, Captain Victor A.
Gretton, Colonel Rt. Hon. John
Percy, Lord Eustace (Hastings)


Chamberlain, Rt. Hn. Sir J. A. (Birm., W.)
Hacking, Rt. Hon. Douglas H.
Peto, Sir Basil E. (Devon, Barnstaple)


Chapman, Sir S.
Hall, Lieut.-Col. Sir F. (Dulwich)
Ramsbotham, H.


Churchill, Rt. Hon. Winston Spencer
Hannon, Patrick Joseph Henry
Remer, John R.


Cobb, Sir Cyril
Hartington, Marquess of
Roberts, Sir Samuel (Ecclesall)


Colville, Major D. J.
Harvey, Major S. E. (Devon, Totnes)
Salmon, Major I.


Courtauld, Major J. S.
Haslam, Henry C.
Samuel, A. M. (Surrey, Farnham)




Samuel, Samuel (W'dsworth, Putney)
Steel-Maitland, Rt. Hon. Sir Arthur
Waterhouse, Captain Charles


Sandeman, Sir N. Stewart
Stuart, Hon. J. (Moray and Nairn)
Wayland, Sir William A.


Shepperson, Sir Ernest Whittome
Sueter Rear-Admiral M. F.
Wells, Sydney R.


Sinclair, Col. T. (Queen's U., Belfst)
Thomas, Major L. B. (King's Norton)
Williams, Charles (Devon, Torquay)


Smith-Carington, Neville W.
Thomson, Sir F.
Windsor-Clive, Lieut.-Colonel George


Somerville, A. A. (Windsor)
Titchfield, Major the Marquess of
Wolmer, Rt. Hon. Viscount


Somerville, D. G. (Willesden, East)
Tryon, Rt. Hon. George Clement
Womersley, W. J.


Southby, Commander A. R. J.
Vaughan-Morgan, Sir Kenyon
Worthington-Evans, Rt. Hon. Sir L.


Spender-Clay, Colonel H.
Ward, Lieut.-Col. Sir A. Lambert



Stanley, Lard (Fylde)
Wardlaw-Milne, J. S.
TELLERS FOR THE NOES.—


Stanley, Maj. Hon. O. (W'morland)
Warrender, Sir Victor
Captain Margesson and Captain




Wallace.


Question, "That the consideration of the Clause be postponed until after the consideration of the new Clauses," put, and agreed to.

Captain BOURNE: I beg to move, in page 8, line 31, to leave out Sub-section (2).
I move this Amendment with the object of getting an explanation from the Chancellor of the Exchequer as to what is intended in this Sub-section. As I understood the original Financial Resolution on which this Clause is founded, the object of the Sub-section is to deal with the assessment of Income Tax in the case of royalties and copyright, and also under paragraph (a) in the case of some rather mysterious preference dividends. This Sub-section is a bad example of legislation by reference. Section 211, Sub-section (2) of the Income Tax Act, 1918, lays down conditions under which a person who has to pay rent for a house may deduct the Income Tax if it is charged to him and charge that Income Tax to the landlord. I presume that the object of this Sub-section as far as paragraphs (b) and (c) are concerned is to provide that where in the case of the payments for royalties or copyright the person making that payment deducts the Income Tax prior to forwarding the cheque to the person entitled to the payment before the date on which this House has agreed to the Budget Resolution altering the Income Tax, he will be entitled to deduct the appropriate amount of the Income Tax in order to get an adjustment on the next cheque which he sends.
I am extremely puzzled as to what is meant by paragraph (a). It seems to me that we have dealt with deduction of Income Tax in the case of preference shares, and I am puzzled to know what preference dividend can be meant which will come under Sub-section (2, a) that is not already covered by Sub-section (1). If there are any, I should have thought that they would come under the terms
of Sub-section (4). Sub-section (1) provides that the amount of Income Tax shall be adjusted on the next payment of the preference dividend, and, if that is not convenient to the company, shall at any convenient time make payment of the amount of the tax, if it is a case of over-deduction, which is due. I do not see what dividend can come under Rule 20, which says that the company may deduct the Income Tax before paying any dividend, or how it can relate to Clause 211 of the Income Tax Act, 1918, Sub-section (2), which deals solely with the payment of any rent, interest or annuity.

Mr. PETHICK-LAWRENCE: This Sub-section deals with the case of an increase in the Income Tax.

Captain BOURNE: The Financial Secretary says that this Sub-section deals with an increase in the Income Tax. What is the position of people who receive royalties or copyright where the Income Tax is reduced but it has been deducted at the source at a rather higher figure than that which is ultimately agreed upon by this House? I understood that this Sub-section was to deal with either case, with an increase or a reduction.

Mr. WARDLAW-MILNE: It is difficult to understand in reading this Subsection and comparing it with the previous Clause exactly where there can be a difference between the cases that are covered by Sub-section (1) and the cases that are covered under this Sub-section. I understand that this provision is to apply in a case in which there is an increase in the amount of tax, but if the Financial Secretary will refer to the previous Sub-section, he will see that the case is equally apparently covered by that Sub-section. It is difficult to understand what is the object of this Sub-section, if it is covered by the previous one and also whether Sub-section (2, b) relating to copyrights and royalties is
only effective if there is a deduction and not an increase. It seems to me that paragraphs (b) and (c) require explanation if they are not covered by the previous Sub-section.

Mr. SNOWDEN: This Sub-section is required to supplement the existing provision of Section 211 of the Income Tax Act, 1918, and relates to the adjustment of insufficient deduction of tax in any year in which the standard rate is increased. The paragraphs relating to copyrights and patent royalties relate to matters which are not at present covered.

Amendment negatived.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Captain BOURNE: I should like to know exactly what is intended by Subsection (4, b). This is an exceedingly complicated Clause and it seems to me that it will make it extremely difficult in a case where an over-deduction of tax has taken place, and where in the case of a preference share part of the dividend is paid at a fixed rate and part at a variable rate. Take the case of a preference share which is fixed at 5 per cent. but where, if the ordinary dividend rises above 8 per cent. the remaining profit is either divided equally or in a certain proportion between the preference shareholders and the ordinary shareholders. In that case, it seems to me that the result of Sub-section (2, b) will mean that the Income Tax on the half-yearly dividend on the preference share, 2½ per cent. which would represent the half of the fixed dividend, will be deducted at the source and will be withheld by the company under the provisions of Sub-section (1, b) inasmuch as an additional 6d. in the £ will be required. If the company has made 10 per cent. and there is an extra 1 per cent. payable to the preference shareholders, in that case the amount of Income Tax on the additional 1 per cent. will be calculated according to Sub-section (3) and the taxpayer will be assumed to have received a somewhat larger income than he has actually received.
That is an extraordinarily clumsy way of doing business and is extremely unfair to the individual taxpayer, particularly if he wants to sell a share, while, as
regards calculating the actual or gross income during any given financial year, the taxpayer will be in a position of enormous difficulty. He will have to look up every one of these preference shares and will have to find out how much of the dividend was due to a fixed dividend or how much has been due to an adventitious dividend, and he will then have to calculate how much dividend was due compared with that which he has actually received. That is putting an unnecessary burden upon the taxpayer. It would have been much simpler to have dealt with this question of preference shares by the provisions of Sub-section (1) irrespective of whether it was a fixed or a varying rate. In the case of a great number of preference shares they are cumulative. On certain occasions they miss a dividend, perhaps for six months or a year, and then the company has a good year and on the next payment the amount of the dividend is greater than, say, the 5 per cent. and may go up to a great deal more in order to make up for the arrears.
Will the Chancellor of the Exchequer inform us what happens under these conditions? So far as I can see, under this Clause the case of arrears comes neither under Sub-section (1), (3) or (4). In the case of such payment being made before the Budget Resolutions have gone through Committee of this House and the dividend warrant has been made out at the standard rate of Income Tax, in the event of there being an alteration in the rate of tax, what is to happen to that portion of dividend which is due on the accumulated arrears? It is a matter of some importance to many taxpayers, especially when we are passing through a rather bad period and when there are companies who have to pay less on their preference dividend, or to suspend the payment of the dividend, but who, when business revives, will almost certainly be in a position to pay the arrears on the cumulative preference shares. I should be glad if we could have an explanation before we finally pass from this Clause.

Mr. WARDLAW-MILNE: Sub-section (4) says:
the expression 'preference dividend' means—
(a) a dividend payable on a preferred share at a fixed gross rate per cent.
Does the Chancellor of the Exchequer regard that as the legal definition, because as he well knows in non-legal circles, a preferred share is not necessarily a preference share in the ordinary use of the term. I wonder whether the definition of preference dividend given in Sub-section (4) is that usually given in the Finance Acts, because if not there may be some slight confusion. I find it difficult to understand the necessity for Sub-section (1) and I make my protest against the Clause being passed in its present form.

Sir HENRY CAUTLEY: I should like to know what is the exact meaning of Sub-section (3). The wording is confusing.

8.0 p.m.

Mr. PETHICK-LAWRENCE: The object of Sub-section (3) is this: Where a company pay a dividend on ordinary shares you treat the amount received in cash as though it was a tax-free dividend. Therefore, you calculate back the gross amount of dividend by adding tax. On the dividend warrant it will appear differently, but in view of the fact that the tax has been changed between the making out of the warrant and the time of its being received, we provide that the actual dividend received by the shareholder should be grossed up to the correct amount necessitated by the new Income Tax which the Budget of that year has imposed.

Sir H. CAUTLEY: I am obliged for that explanation, and that is what I thought the Clause was intended to mean, but the hon. Gentleman did not, I think, give due weight to the words having reference to where a dividend has
been deducted by reference to a standard rate of tax greater or less than the standard rate for the year in which the dividend became due.
Does that mean when the dividend was earned or when it was paid? If it only means what the Financial Secretary has just said, my objection disappears.

Mr. PETHICK-LAWRENCE: The period in which the dividend was earned has nothing to do with the amount of tax to be paid.

Sir A. STEEL-MAITLAND: Take a dividend of £1,000, the tax on which
would have been £200 at the old rate, leaving a net £800. I take it that you then gross that up to get at an income of which £800 was the net amount, you bring it up to something like £1,032, and you calculate 4s. 6d. on that and receive your dividend warrant in that form.

Mr. PETHICK-LAWRENCE: The trouble arises because the warrant has been made out before the Budget speech is made. Therefore, the dividend warrant will appear as the ordinary £1,000 gross, less £200 tax, but it is treated by the Revenue as if what is written on the dividend warrant was not correct, and the only thing that stands is the cash payment of £800, which is treated as being the correct cash payment on a gross dividend of something over £1,000.
In reply to the hon. and gallant Member for Oxford (Captain Bourne), I think he stated the case quite correctly. As he said, it is somewhat complicated, but looking at the various alternatives, it has been decided that this is the best method of doing it. He asked what would happen in the case of arrears of preference dividends. They are treated exactly as if they were current dividends. Suppose there is one that is six months in arrears on a 5 per cent. preference share, and it has been decided to pay them all in the spring payment, then, instead of paying on 5 per cent. in the spring, they pay on 10 per cent. in the spring, and the whole of the incorrect amount of the tax is passed on the next payment.

Captain BOURNE: Would that come under Sub-section (1) of this Clause? If so, it is obvious that if you suddenly pay 7½ per cent., with under-deduction of Income Tax, the amount due to come on the next payment, which would presumably be at the rate of 2½ per cent., would be very large indeed. Is it to be treated as a preference dividend under Sub-section (1)?

Mr. PETHICK-LAWRENCE: The difference between Sub-sections (1) and (2) is the difference between over- and under-payments, and in either case, whether over- or under-payments, in the case of a double dividend the double error would be passed on to the next payment.

Captain CAZALET: Can the hon. Gentleman assure us that this Clause has been drafted after the Attorney-General has considered certain points arising out of it, and is it drafted in accordance with the convenience of the majority of companies which have been consulted? Every explanation which the Financial Secretary has given has, I think, been perfectly fair, and if we could get that assurance, that it is for the convenience of the various companies, I think the Committee would be grateful.

Mr. P. SNOWDEN: The hon. and gallant Member raised that question a few moments ago, and I had intended to reply, but the eloquence of a subsequent speaker drove it out of my mind. Yes, that is so. These provisions have been discussed with the Federation of British Industries and the London Chamber of Commerce.

Sir D. HERBERT: The explanation which has been given has been quite satisfactory, and I did not wish to press my Amendment to a division, but a great deal of this debate might have been saved if this explanation had been given on the Report stage of the Budget Resolutions. We tried then to get further information, and we were told to wait for the Bill. I make that suggestion, that in future it would be a very great help if we could get the necessary information beforehand as to what the Government think about these different Clauses.

Sir H. CAUTLEY: In the interests of the Bill, may I suggest to the Chancellor of the Exchequer, at the end of Subsection (1), in order to make the legal phraseology right, that he should either leave out the words:
and not in either case to the benefit of the person entitled to the payment., or to the security or share, at the date when the original deduction was made,
or that he should add the words:
except in cases where the owner, shareholder, or owner of the shares at the two dates is one and the same person.

Mr. PETHICK-LAWRENCE: The Attorney-General has already said that he will consider that question between now and the Report stage.

CLAUSE 12.—(Deduction not to be allowable for purpose of Surtax in respect of interest on loans used for payment of premiums, etc.)

Sir D. HERBERT: I beg to move, "That consideration of the Clause be postponed until after the consideration of the new Clauses."
I move this in no hostile spirit, but in the hope that we might more easily be able to get through a difficult Clause, with the main principle of which we on these benches are in complete sympathy. This Clause quite shortly is to meet the particular form of tax avoidance known as the single premium policy. Some of the insurance offices themselves, I believe, brought this matter to the attention of the revenue several years ago, as a matter which should be dealt with by legislation. Certain insurance offices were inclined to ask people to do these things, to advertise this particular method of tax avoidance, which was a little hard on some of the companies which did not do it. The fact remains that the companies are at the present time endeavouring to assist the Government to stop this method of tax avoidance within such limits as they think to be reasonable and not to interfere with the spread and general prosperity of life insurance in this country. My particular reason, under the circumstances, in asking for a postponement of the Clause, which I wish well, is this, that the Clause, as drawn, suffers from almost every failing that a difficult Clause of this kind can possibly have. The Clause is, in my view—

The DEPUTY-CHAIRMAN: The hon. Member must give specific reasons why the Clause should be postponed. He cannot enter into a general discussion on its merits or demerits.

Sir D. HERBERT: Why I ask that it, may be postponed is this, that there is among the new Clauses one in my name which is designed with the same sort of object, and I suggest that if, between now and the time when the new Clauses are reached, the representatives of the Revenue and the life insurance offices and one or two Members of this House who are taking especial interest in this matter were to get together, it would be possible to bring before the Committee at the later stage a Clause which would
go through very much more quickly. With regard to the new Clause, let me say at once that I admit that it does not go anything like the way the Government wish, but the point is that it is drawn on an entirely different plan, and there is there all the framework, which can be added to so as to cover up every single point which the Government desire to cover in the present Clause. The framework of the Clause is immensely shorter than Clause 12, much easier to understand and much less likely to be brought up in the courts for interpretation.
I am moving this Motion with the very best intentions. I am trying to get a thoroughly satisfactory Clause, and I hope the right hon. Gentleman will agree to postpone this Clause until after the consideration of the new Clauses. In the meantime, I will do all I can, and so would many of the life offices, to meet the right hon. Gentleman and his representatives in order to frame a new Clause which might be put down in the name of the Government. If I were permitted—and I say this without hesitation—I could point to at least eight different passages in this Clause the interpretation of which is very doubtful and to at least three cases in which it is pretty obvious the intention of the Government is to allow an exception from the Statute, and in every one of these cases the attempt to give an exception is absolutely nugatory and worthless. In these circumstances, and in view of the perplexity and the difficulty of the Clause, I hope the right hon. Gentleman and the Financial Secretary will agree to put down Clause 12 after the consideration of the new Clauses.

Mr. P. SNOWDEN: I thoroughly appreciate the spirit in which the hon. Member put forward his suggestion. May I say that since the Budget negotiations have been going on between the representatives of the life assurance companies and the Board of Inland Revenue. The hon. Member is quite right in saying that most life assurance companies are anxious that this matter should be dealt with, and I should like to acknowledge the assistance they are giving in trying to prevent these abuses, and, at the same time, put no obstacles in the way of genuine assurance policies. There are a few outstanding
points upon which agreement has not been reached. Grateful as I am to the hon. Member for the kind way in which he has submitted his proposal, I am afraid that I can hardly accept it. It would be better to take this Clause now rather than at the end of the new Clauses, and I feel certain that before we get to the Report stage we shall come to a satisfactory understanding on the outstanding points with the life assurance companies, and that we can re-draft the Clause and embody whatever changes may be necessary in order to carry out the agreement which has been made. I hope the hon. Member will acquiesce in this view. There is, of course, no use in discussing the minor points in this Clause, because they may be removed by the understanding between us and the insurance companies, and I hope we shall be able to submit on the Report stage a re-drafted Clause which will meet with the general consent of the House. I am quite sure that hon. Members opposite are as anxious as we are to remove the abuses which have arisen in this matter.

Sir D. HERBERT: I can understand the reluctance of the right hon. Gentleman to postpone this Clause, but I am grateful for what he has said about the possibility of drafting a new Clause. A similar position to this arose on the Finance Bill in 1922. The Bill submitted dealt with the dodging of tax by what is known as the one-man company. The right hon. and learned Member for Hillhead (Sir R. Horne) was Chancellor of the Exchequer at the time, and I criticised the proposal as much as I should criticise the proposals in Clause 12. He made the same offer to us, but we were not satisfied and he himself ultimately came to the conclusion that a Committee stage on such an unsatisfactory Clause would be a waste of time. May I suggest as an alternative that the Chancellor of the Exchequer might allow this Clause to be postponed until after Whitsuntide, or until after Clause 21? That would give us a matter of 10 days between now and the next day on which the Committee deals with this Bill, and during that time some of us will, I think, be able to persuade the right hon. Gentleman that it would be much easier to get through the Clause in a revised and different form. If he insists upon taking the Clause now,
some of us are bound to press strongly Amendments to almost every line. He could get rid of all these by discussing the Clause in a room. We cannot get rid of them by agreement across the Floor of the House, because one Amendment must depend upon another, and the immense extent to which the Clause has to be amended in order to make it workable and effective makes it really impossible to alter it in debate in Committee. Indeed, I suggest that if a few of the people concerned got together they would probably decide on a re-drafting of the Clause on entirely different lines. I therefore beg the Chancellor of the Exchequer to consider whether he would not be saving the time of the Committee and assisting his own course if he would postpone the Clause until a later sitting of the Committee.

Lieut.-Colonel Sir FREDERICK HALL: I join with my hon. Friend in his appeal. As I stated when the Report stage of the Financial Resolution was taken, the great majority of us on this side wish to assist the Chancellor of the Exchequer in doing away with the abuses that have grown up amongst certain insurance companies with regard to these people. We do not believe it is a legitimate form of insurance, and we set ourselves entirely against it. Admittedly people are justified in saving anything possible as long as they keep within the four corners of the law, but that principle can be stretched too far, and I say that certain insurance companies have been particularly active in advertising this form of insurance for the purpose of reducing the amount that goes into the coffers of the State.

The DEPUTY-CHAIRMAN: The hon. Member is now discussing the general principle of the Clause, but the Motion before the Committee is that the Clause be postponed.

Sir F. HALL: I was merely telling the Chancellor of the Exchequer that many of us are completely opposed to the operations that have taken place with certain insurance companies, and that we want to assist him. Is it advisable to go on wasting a vast amount of time in discussing things that the right hon. Gentleman knows full well will involve considerable alteration in the Clause? I can see the difficulty of leaving the Clause until after the new Clauses, but will there be
any disastrous effect by leaving the Clause in abeyance until after the Whitsuntide Recess?

Mr. P. SNOWDEN: There are not the usual party divisions on this matter, and we are all anxious to do what is best to save the time of the Committee. I am advised, however, that it is very unlikely that the negotiations with the life offices can be completed before we reach the end of the new Clauses. I am very anxious that we should not have a long, and what may prove to be an unnecessary, debate upon this Clause now. Really I do not see very much difference in result between the suggestion that has been made by the hon. Member for Watford (Sir D. Herbert) and that which I have made, namely, that we should add this Clause to the Bill now, but on the distinct understanding that wherever Amendments may be necessary to give effect to the agreement reached those Amendments shall be embodied in the Clause and not form a new Clause. I do not think it necessary to strike out the Clause altogether and to draft an entirely new Clause. The necessary Amendments may be of a rather drastic character, but not quite so drastic as to necessitate throwing the Clause into the waste-paper basket.

Sir A. STEEL-MAITLAND: There is a very great difference between taking the course that the Chancellor of the Exchequer proposes and what we suggest. What he suggests is a comparatively brief discussion on the Clause now, and that we should do everything else necessary after he has discussed the matter with his expert officers and the insurance offices. It is a very different state of affairs from that which happened on Clause 10. On Clause 10 what was practically an agreement was come to on a precise point of substance, not as to the way in which it would be expressed or as to the methods by which it would be carried out. Therefore it was reasonable that we should agree to the passing of Clause 10 and allow it to be brought up again on Report, knowing quite well that there would be no difference then in the point of substance. My hon. Friend the Member for Watford (Sir D. Herbert) is more versed in the matters of detail in the present Clause than I am. I also have had discussions with representatives of insurance companies, and it seems to me that the
Clause as it stands will call for fundamental reconstruction from the point of view of the Chancellor of the Exchequer himself. Subsection (3, c) needs to be recast. It is clear, therefore, that we cannot treat this Clause in the same way as Clause 10. What we should have before us is really a new Clause, drafted after consultation with the insurance offices.

Mr. P. SNOWDEN: There is at least this in common between this Clause and Clause 10, that there is a large measure of agreement between the two sides of the Committee. The difference is that these matters which are outstanding, and which are being discussed with the insurance companies, are by no means as numerous as hon. Members on the other side assume.

Sir D. HERBERT: But they are very important.

Mr. SNOWDEN: They are very important. Sub-section (3, c) to which the right hon. Gentleman referred is one which has recently been under discussion between the parties and I understand a very large measure of agreement has been gained. It is agreed that the Clause needs some revision. This is the position. We may postpone the Clause to the end of the New Clauses, but we should be in exactly the same position then as we are in now. [HON. MEMBERS: "No!"] Oh yes. We should be in exactly the same position. We might have such a discussion as we shall have to-night if we proceed with this Clause; but if we were not then in a position to know what was the result of the discussions with the insurance companies, we could not get any further, and we should have to wait until the Report stage. As between the two courses, it is just about as broad as it is long, but if there is any advantage at all, I think it is on the side of the course which I have suggested.

Sir D. HERBERT: I am afraid I can hardly agree with the right hon. Gentleman. The difference is that under my proposal hon. Members would have the opportunity of considering the Clause in a Committee stage and on a Report stage. The right hon. Gentleman knows that, quite apart from the question of getting only one stage instead of two, the methods which are available to hon. Members of discussing and amending, on
the Report stage, a complicated Clause of this kind are very much less than those which they have in Committee. We should not on a Clause of this kind allow ourselves to be deprived of the Committee stage. I am perfectly certain that if we discussed this Clause tonight with all the Amendments which have been put down to it and if we tried to make it anything like a serious Committee stage, we should possibly spend all night in discussing this Clause which would not be a particularly good thing from any point of view. Possibly when we had come to the end of it, we should have done no good whatever if the Government merely used the big stick and employed their majority and refused to accept any Amendments. It would either be that or else we should have amended the Clause in various ways, by consent, but in such a manner that at the end it would probably be almost worse than if it had not been amended at all.
This Clause cannot be amended satisfactorily in that way. This Clause will be no use until it is amended, if not redrafted, round a table by perhaps less than a dozen people. As soon as that has been done, then we can get a Clause which we can pass through the Committee stage in a matter of three or four hours without ill-temper, instead of spending a whole night upon it with the risk of bad temper. At the risk of appearing very persistent, I would ask the right hon. Gentleman to withdraw this Clause, and to bring up another Clause at any stage he likes, but do let us try to get rid of the hopeless and very unpleasant task of having to try to discuss in this Committee a Clause of this kind.

Mr. A. M. SAMUEL: This Clause is one of the most difficult in the Bill, and is, I think, about as difficult a Clause, as any of us have ever had to tackle during our Parliamentary experience. We start from this point of view, that if we can help the Chancellor of the Exchequer to stop tax-dodging we are quite willing to do so. We offer no opposition to this Clause as far as it is intended to stop tax-dodging, but at the same time there are many defects in it which we would like to see altered, and I think the right hon. Gentleman himself, when he has considered all the aspects of our case, will agree with our view in that
respect. But we must not make these alterations in a hurry and we require at least the two stages in order to lick the Clause into shape. My own impression is that we should not make a good job of this Clause even if we spent two nights and two days debating it in Committee in its present form.
We do not want this to be a Clause which, for the next five years, will lead to constant litigation. If we are to have a Clause of this kind, let us have it considered at a round-table conference of the leading men in the insurance world who, I am sure, are just as anxious as we are to help the right hon. Gentleman to put an end to tax-dodging, and who would be willing to help him to recast the Clause in such a way as to give effect to what the right hon. Gentleman is desirous of doing in that respect, while at the same time doing no injustice to those who wish to effect insurance policies. This Clause, as it now stands, would operate most unfairly against elderly people, or people of impaired lives, who wish to take up short term policies, and who may desire to borrow money upon them. I urge the Chancellor of the Exchequer to accept our proposal in the spirit in which it is offered. Let him meet us in such a way that it will be possible to get an effective Clause hammered out, without doing hardship to anybody. It is a highly technical subject upon which we should have the opinion of those people who understand infinitely more than we do about the nuances of insurance; and by adopting that course, we may save the people of the country a great deal of trouble and expense in litigation.

Mr. P. SNOWDEN: Of course, my main object is to save time. I do not want to have two discussions covering the same ground, one of which would be altogether futile, and if I could be assured that I should be in a position, by the time we reach the end of the new Clauses, to submit Amendments to revise the Clause, that would be satisfactory. I quite realise that it would save time, as compared with the course of spending the whole of the coming night in futile discussion. This discussion has been carried on in such a friendly and agreeable way that I feel reluctant to appear adamant, and I am willing that we should postpone the consideration of this Clause
until the end of the new Clauses. I will do my best in the meantime to advance the negotiations or conversations, so that I shall be able to put the decision before the Committee when we reach die end of the new Clauses. May I add this, that a Committee of the House of Commons is not a suitable body to deal with a complicated and highly technical matter of this kind, and I am sure that the best way to get a good Clause and an acceptable Clause would be to adopt the suggestion, if it were practicable, that has been made to get a small body of men who really understand this question round a table to hammer out the whole matter, because we in this Committee are anxious to devise some practical means by which the abuse we are trying to remedy should be removed. I am sure that my hon. and learned Friend the Attorney-General will be delighted to meet the hon. Member opposite and to go over these points with him. I am sure that in such a conversation as that the services of the hon. Member would be invaluable.

Sir A. STEEL-MAITLAND: We acknowledge the spirit in which the Chancellor of the Exchequer has met the representations made to him. We are anxious to have the situation quite clear, and I gather that, if a new Clause is re-drafted or this Clause comes in an amended form, or in whatever form it ultimately reaches us at the end of the new Clauses, we will be free to discuss it quite fully, with our rights unencumbered—

Mr. SNOWDEN: Yes, certainly.

Sir A. STEEL-MAITLAND: We only want to make that clear. If the right hon. Gentleman is agreeable to that, it is a wise course, because it is quite clear that in a matter of this kind we cannot originate proposals easily in Committee. The Committee stage is suitable for criticising, but not suitable for originating. It will be better, therefore, if we can deal in Committee with a Clause that has been thought out between the right hon. Gentleman and insurance companies.

Sir D. HERBERT: I am very grateful to the Chancellor of the Exchequer for what he has said. So far as the exact form of the Motion is concerned, I will meet his difficulty. The form in which I moved it was "That the consideration of Clause 12 be postponed until after the consideration of new Clauses." If I
were to move merely that consideration be postponed, it would come on at the end of the Bill, and before the new Clauses.

The DEPUTY-CHAIRMAN: The Question put to the Committee was, "That the consideration of Clause 12 be postponed until after the consideration of new Clauses."

Sir D. HERBERT: That is exactly what I stated. What I was saying was that if, with permission, I proposed the Motion in a different form, namely, "That consideration of Clause 12 be postponed," it would come in before the new Clauses, and if the Chancellor wishes that I am ready to do it.

CLAUSE. 13—(Amendment of s. 34 of Finance Act, 1926.)

The DEPUTY-CHAIRMAN: There are a number of Amendments down to this Clause, many of which are consequential, and we might have a general discussion on the Clause on the first Amendment.

Mr. A. M. SAMUEL: I beg to move, in page 11, line 42, to leave out the words "or accounts have."
Clauses 13 and 14 are very long and complicated, but I understand that they are only minor provisions which the Chancellor promised with the intention of removing certain hardships which may occur under the present Income Tax law when a new firm begins business.

The DEPUTY-CHAIRMAN: The hon. Member is discussing Clauses 13 and 14. I called Clause 13, to which there are a number of Amendments. The hon. Member for Oxford (Captain Bourne) has the first Amendment down. There are quite a number which are consequential, and I suggest that we might have a discussion on Clause 13 on the first Amendment.

Mr. SAMUEL: I am following your directions and moving that Amendment. I was trying to grasp what the Clause meant. I understand the Clause to remove certain hardships, but I take exception to it because it allows the Revenue to say which is the period to be regarded as the one year before assessment. Why should the Revenue be
given this option? They are an interested party, and there should be some right of appeal. If the Revenue are given this option, we should have strong reasons offered to us why a right of appeal should not be given to the Special or General Commissioners.

Sir HENRY BUCKINGHAM: The Clause gives very far-reaching powers of deciding the accounting dates for any particular firm. It is a consequence of a decision given in the High Court by Mr. Justice Rowlatt; therefore I am not going to complain of the general purposes of the Clause, but I rise to ask the Attorney-General something in the nature of a conundrum. I want to know how the Inland Revenue would deal under paragraph (a) with the very common and harmless case of a firm or company which desires for reasons of its own to change its accounting day from 30th December to 30th November? Obviously that firm, not having 12 months' accounts to submit, could not come under paragraph (a), and presumably, therefore, it would come under paragraph (b), under which the Commissioners of Inland Revenue would decide what period of 12 months should be deemed to be
the profits or gains which are to be taken to be the profits or gains of the year preceding the year of assessment.
The Attorney-General knows quite well that there are many trading firms, and in particular many manufacturing firms, who depend entirely upon their stocktaking to arrive at an accurate figure of their profit or losses in the preceding year. Firms may wish to change their stocktaking date from the end of a period of 12 months to the end of 11 months. My own firm did it many years ago. We always used to make the 30th of December our accounting date, but for good reasons we changed it to the 30th November, and therefore were able to produce only a profit and loss account for 11 months for that year. I ask how the Commissioners of Inland Revenue can possibly deal with a case of that sort under this Clause.
I have no objection to the general powers taken, but it is quite obvious that words should be inserted in the Clause to deal with such a frequent and common case as I have described. There
is no question of trying to dodge the payment of revenue. There are a great many reasons—market reasons, financial reasons, all sorts of reasons—why a firm may wish to change the accounting period from one period of the year to another. As it stands, the Clause does not deal with such cases; or, if they are dealt with under the Clause, it is left to the Commissioners to decide what period
shall be deemed to be the year the profits or gains of which are to be taken to be the profits or gains of the year preceding the year of assessment.
The commissioners may say in such a case: "We are sorry that you Cannot put before us a 12 months' trading account, and the only period of 12 months we can accept as the basis of profits of the year preceding is a period of 12 months about two or three years ago." Under the Sub-section they would be entitled to say that to a firm which could put forward trading accounts for only 11 months. I am sure the Attorney-General will recognise that there is something in my point, and I will be obliged if he will consider what I have said and, if necessary, include something in the Bill on Report stage which will meet it.

9.0 p.m.

The ATTORNEY-GENERAL: After a year's experience of Revenue work I would be the first to admit that there are many conundrums which anybody can ask but which it is extraordinarily difficult to answer. I am not going to pretend for one moment that I have anything like an encyclopaedic knowledge, for I see sitting opposite to me a great many gentlemen who could very easily prove that I have not. I will do the best I can, and that is all I can do. In 1926, when a change over was made to the one-year period, there was included in the Finance Act of that year a Section, Section 34, designed to deal with these cases, and, broadly speaking, we desire to continue Section 34, subject to minor details. The first difficulty relates to new companies. The whole principle of Income Tax is that, although you pay income in respect of the income of the year of assessment, yet by a conventional standard it is measured by the income of the previous year. In the case of a business, instead of taking as the year of measure a
purely artificial year—the financial year from the 6th of April in one year to the 5th of April in the following year—which is not a period which coincides with the period of the accounts of any business, you are entitled to take as the year of measure the actual 12 months' accounts of the business, so long as those accounts end at some date within the year of measure. Section 34 of the Act of 1926 started in this way:
Where in the case of any trade, profession or vocation.… it has been customary to make up a balance sheet.
But what is the position of a new company? Of course, a limited liability company must keep accounts. One can predicate of it that it will go on keeping accounts so long as it lives, or the directors will find themselves in gaol. On the other hand, can we say of a new company that it has been "customary to" make up the accounts? Mr. Justice Rowlatt heard a case which raised this very point. All of us who know him know what a very high authority he is on these matters, but even he said of Section 34, "I cannot understand it." He decided that in a case such as I have mentioned you could not say that it had been "customary" for the company to make up its accounts, and that consequently you could not accept as the measure the firm's accounts, notwithstanding that they ended within a date during the term of measure. You could not take that because you could not say it had been "customary." Obviously that is not good business. It is very undesirable.
Every Member of the Committee will agree that it is undesirable to have to assess on a completely artificial period. In the case of a business which has just started and is on an ascending scale, is doing rather better every year, it will pay that business to have its year of measure thrown back as far as possible. The accounts are going up all the time. If you get a company which is going downhill it pays them to throw their year of measure as far forward as possible, and in a case such as that it does not pay them to take the actual business year, but to take as the artificial standard the 6th and the 5th April which involves a complicated splitting of accounts. Probably hon. Members will say that the next Clause also contains
complications, but in that Clause we have endeavoured to meet the case of the company that is going downhill, and we are putting ourselves in the position even in the case of a new company of accepting the actual business accounts. We accept as our period of measurement a 12 months' account which ends at the same date as in previous years. This is purely a reform which Mr. Justice Rowlatt indicated should be made, and he said that the framers of the Act of 1926 did not contemplate the use of this word "customary" and that very important results would follow from it. What is customary is the question of fact. It is not a question upon which the Courts can lay down any definite guidance. One body of Commissioners may take a different view from another body of Commissioners, and where are you to draw the line? If a company has gone on making up accounts for two years, three years, or four years, is that customary? It is a very bad thing to have a purely arbitrary system, and that is going to be done away with under this Clause.
The only other point is that we are seeking to amend Section 34 of the Finance Act, 1926, in order to deal with this difficulty. I hope the Committee will not expect too detailed an explanation, and in order to make the matter plain it would be necessary for hon. Members to take out pens and pieces of paper, write the thing out and even to draw graphs, but I think they may take it from me that it is possible from the Finance Act, 1926, as it stands to do what I have already described if you want to dodge payment of the tax. Suppose that a company has a fairly steady and prosperous year, and then the same company has three most exceptional months during which they make money hand-over-fist, and in that three months that company makes more than in the previous year. What they do is that in making up the accounts they leave a gap, and leave out the three months during which they make such large profits, and start keeping a new account commencing at the end of those three months of 12 months and making the year finish within the year preceding the years of assessment. It is to avoid that possibility that this Clause is put forward. We provide for a perfectly legitimate change-over in dates from one date to another for business reasons, and
we are not proposing any alteration of the law with regard to that point. I will quote Section 34 of the Finance Act, 1926, Sub-section (1, a) which provides that
If no account for a period of one year was made up to date within the year preceding the year of assessment, or if more accounts than one were made up to dates within that year, the Commissioners of Inland Revenue shall decide what period of 12 months shall be deemed to be the year the profits or gains of which are to be taken to be the profits or gains of the year preceding the year of assessment.
That is the existing law.

Sir H. BUCKINGHAM: Suppose that in the year preceding the year of assessment the firm has finished its year in 11 months instead of 12 months. In that case, do the Commisisoners fix the 12 months' profit?

The ATTORNEY-GENERAL: I think the answer is that, on the hypothesis which the hon. Member puts, there would then be no business year of 12 months finishing in the year of assessment, and they have to decide what period of 12 months they are taking. What would happen in that case would be that they would make up the artificial account for the period from the 6th April to the 5th April for the year preceding the year of assessment. That would involve a dissection of accounts, and it would make up an artificial account.

Lord EUSTACE PERCY: Is it not the case that there would be two accounts made up by the Commissioners, and paragraph (a) would not apply, because there would be more than one account?

The ATTORNEY-GENERAL: I do not think the case has been put where there would be two accounts. Take the preceding assessment as the term of measurement. Say that in September of the year of measure the firm's accounts are made up, but for some perfectly legitimate reason, instead of being 12 months' accounts, they are for a period of 11 months. That is the only account which they have in the year of measure and it is not 12 months.

Lord E. PERCY: Would it not be open to that firm to make up its accounts from the 6th April to the 5th April? That would be two accounts for the year, and in that case paragraph (b) would come
in, and the Commissioners would assume the right to judge which 12 months was to be taken.

The ATTORNEY-GENERAL: The right hon. Gentleman is quite right. What happens in that case is that the Commissioners of Inland Revenue take the artificial period from the 6th April to the 5th April and dissect the accounts, and make up what they think is the measure upon which the company has to pay. That is not being changed by this Bill, and we are merely continuing what is done at the present time by Section 34 of the Finance Act, 1926. We are merely altering Section 34 of that Act in the two respects which I have indicated. We are doing away with the word "customary," and we make quite certain that there will not be any gaps by taking a lower period of measure. Subject to that we merely repeat Section 34 of the Finance Act of 1926.
The hon. Member for Farnham (Mr. A. M. Samuel) said that the Commissioners of Inland Revenue are being allowed to decide, and there is no appeal, and he said that that seemed hard. It is a poor answer to say that we are following in that matter Section 34 of the Act of 1926. We are doing so in fact, but we must try to improve upon what was done in 1926. I think the real answer is this: It does not so much matter what period you take, so long as you adjust the inequalities which result from taking a particular period. It would obviously be bad to take some period which had already served as a measure and had already borne taxes. That would be double taxation. Consequently, Section 34 of the Act of 1926 provides, in Sub-section (3)—which, as the Committee will see, is not touched, and still remains the law—that:
An appeal shall lie against any assessment or additional assessment or in respect of any repayment of tax under Sub-section (2), and any such appeal shall be made to the General or Special Commissioners.
If a taxpayer says, "You, the Commissioners, have hit me very hard here. You have taken an unfair period, and the result of your taking an unfair period is that you have served upon me an additional assessment, or a fresh assessment, and I have had to pay more tax," the taxpayer then has the right
of appeal to the General or Special Commissioners against that assessment, and, consequently, he has his right of appeal against the consequences of what the Commissioners of Inland Revenue do in taking a particular period of 12 months. That, no doubt, is why the Chancellor of the Exchequer in 1926 was satisfied to leave the matter in this way, and, for my part, in this matter at any rate, I think the Chancellor of the Exchequer of that time was justified. It is necessary that this matter should be determined, and, as long as there is an appeal against the consequences, all is well. Therefore, I think the Committee will do well to leave this provision as it is.

Mr. A. M. SAMUEL: The calculation made from the figures of any particular year may be quite in order and quite fair, but that is not the point. The Attorney-General has fenced away from the point which I put to him. The point is this: Why should the Revenue be given the option of fixing the period which is to be regarded as the one year before the year of assessment? If the Revenue is to be given that option, that may be the point of grievance of the taxpayer. The Revenue ought not to be the judge in its own case, and the taxpayer ought to be conceded the right of going to the General or Special Commissioners to adjudicate upon his grievance, if he has one, in regard to whether the period selected by the Revenue is a fair one. That is the point that I want to put to the Attorney-General, and not as to whether the deductions based upon any one period are fair or not.

The ATTORNEY-GENERAL: Why does the taxpayer object to a particular period of 12 months being taken? He objects because it results in inequity to him—it results in double taxation, or in his paying too much tax. He must, before he is called upon to pay any tax at all, be served with an assessment, and, as he is given here the right of appeal to the General or Special Commissioners, I maintain that, although he has no right of appeal in so far as the period taken is concerned, he is absolutely protected from any inequity which follows as the result of taking any particular period. That protection he gets by virtue of his appeal to the General or Special Commissioners. That is why
it was that in 1926 this House was prepared to leave the matter in that way, and that is why I suggest that this Committee may rest content that the taxpayer is amply protected.

Sir L. WORTHINGTON-EVANS: The appeal seems to be against the assessment, but suppose that, while the period taken is complained of, the assessment is perfectly right. If the assessment is right, there will be no successful appeal against it. The hardship is in taking the particular period in question, and the Clause says that the Commissioners of Inland Revenue can fix the period. The period having been fixed, the assessment may be perfectly right. It is no use then appealing against the assessment, because it is right, but the period may be a double period, or a period which is not a representative period. It may be, as the Attorney-General said, a period including three months of totally unusual profits. That period having been selected by the Commissioners of Inland Revenue, the assessment may be right, including those three months' exceptional profits, but the period is not representative of the business of the individual or company. What I want to know is, whether the appeal against the assessment is sufficient also to cover the period, if the assessment is correct.

The ATTORNEY-GENERAL: If you select a particular period, it must be a period of 12 months. The right hon. Gentleman will agree that there is no hardship on the taxpayer if he has to pay taxes in respect of income which he has in fact received. The great hardship is in having to pay double taxation, and, if there is any question of double taxation, obviously the right procedure is to appeal against the assessment. So long as there is no question of double taxation, why should not a taxpayer pay taxes in respect of income which he has actually received in any given period of 12 months, the hypothesis being that he has not already paid it? Otherwise, of course, there is an appeal against the assessment. In case of double taxation, you appeal against it by appealing against the assessment. The period having been fixed, that is the starting point, the terminus from which you begin, and, as you go on from year to year, you follow on with periods of 12 months after that. The whole point is
that any irregularities adjust themselves, good years compensating for bad years.

Sir L. WORTHINGTON-EVANS: So long as the given period is not in two years.

The ATTORNEY-GENERAL: If there is any question of any period coming in twice, either as measure or as tax, I can assure the right hon. Gentleman that there will be an appeal against the assessment.

Sir L. WORTHINGTON-EVANS: If it is only the period?

The ATTORNEY-GENERAL: If there is any question of double taxation, either by measure or anything else, there is an appeal against the assessment.

Lord E. PERCY: The Attorney-General has given the case of a period of three months which is particularly good, and which the taxpayer, from his point of view, might try to miss out; but take the contrary case, namely, that of three particularly bad months which the Inland Revenue desire to miss out, selecting a period of 12 months which does not include them. They have a perfect power to do that under these words, and there is no appeal against it, because the assessment for that period of 12 months is a correct assessment. What is the position then?

The ATTORNEY-GENERAL: Why should not the taxpayer pay tax on income that he has received? So long as he does not pay it twice, I do not see what grievance he has.

Captain BOURNE: I am much obliged to the Attorney-General for his explanation of this Clause, which indicates that on the whole the Clause has the meaning that I thought it had. There are, however, two points which I should be glad if the Attorney-General would explain. Section 34 of the Finance Act, 1926, deals with one account only, and I am puzzled by the words "account or accounts," and "accounts.… made up to a date or dates." As I understand it, by Section 29, of the Act of 1926 the three years' average was abolished, and the preceding year was constituted the year of measurement. If that is correct, I am not certain why it is necessary to reintroduce the three years immediately preceding the year of assessment. I cannot
quite understand the point. It seems that what is actually taken as the year is the year preceding that in which the account is made up to a definite date. Taking the part of the world with which I am familiar as regards farming, the account is generally made up to when the tenancies change, which will be the 2nd February. Presumably, that account would be the measure for that year, running from the 3rd February to the 2nd February each year. I cannot see what is the necessity for the accounts for the three years immediately preceding that, unless they are going to be used to average out the year. It does not seem that that is the case. Am I right in assuming that the only object of these words is to prevent the taxpayer missing out the three good months, to which the Attorney-General referred, and equally to prevent the Inland Revenue missing out, the three bad months?
The second point is with regard to the words "was the only account made up." There is one point that occurs to me with which the Attorney-General did not deal. You have the case of a farm where a partner either retires or dies during the year of assessment. It is perfectly obvious that an account is going to be made up from the date of his retirement in order that his share of the business may be paid up or an assessment made to ascertain it. It does not necessarily follow that the partnership or business will come to an end, and I want to know whether in the event of a partner either dying or retiring, and the account not being made up to the normal trading year, but to another date for some reason, that would take the account for assessment of Income Tax out of paragraph (a)? I can quite conceive the case where a farmer would be prepared to carry on as a firm, in spite of the fact that in the case of one partner dying it was necessary to make up a special account. It may be necessary to make up a special account in the middle of November, and estimate his share of the business, although the business ordinarily makes the accounts up to 31st December. It would not be the only account in such a case, and, therefore, it would not come in under paragraph (a). That is a matter which, at least, requires consideration between now and the Report stage.

Mr. HASLAM: I am not altogether satisfied with what the Attorney-General has said in regard to the appeals against the period of assessment. In spite of what he said in his concluding remarks, I should like to point out that with the case of the 11 months' assessment which for some perfectly legitimate commercial reason is taken, he stated, in practice the assessment would be made from the 6th April to the 5th April, whatever those 11 months might be. That is what he said. After all, the question is, what is going to be done to the traders of the country? If it is a practical thing, and if there is a short period for some legitimate reason, and that period is going to be taken for this particular 12 months, surely it is obvious that some months might escape taxation while other months might have to pay, being assessed twice over.

The ATTORNEY-GENERAL: I did say I thought that was the practice existing to-day, but I would say that we are not seeking to change or to alter that at all. If I was right, that will continue to be the practice. If the practice to-day is to put on, artificially, an extra month at the end of the 11 months by means of an analysis of the new accounts, that will continue. We are not seeking to snake any alteration whatsoever in the existing law.

Mr. HASLAM: Yes, but in view of this Clause, surely what is done to-day and what is the existing practice is of very considerable importance. The Attorney-General asserted that there could be no appeal on the period of assessment. After all, the period of assessment may involve very considerable issues, because if a certain case is assessed twice over, it is obviously unjust, and, therefore, it does seem to me that some words should be inserted which would act as a safeguard. If for any legitimate commercial reason, a company does take an abnormal period of 11 months, 10 months or nine months, as is frequently the case, I really think that some words ought to be put in which would safeguard them and give them a right of appeal on the period, and allow the question of the period to come in and be argued on the appeal. I think the Attorney-General might consider that matter between now and the Report stage.

Sir H. BETTERTON: As the Attorney-General has said, this is a very difficult
and obscure Clause. It has been said before that Section 34 of the Act of 1926 is also obscure. The Committee wants to be satisfied exactly what alteration the Bill makes in the existing law. I confess that, with the very best will in the world to follow the Attorney-General, I am not now quite satisfied as to what the effect is. It is clear, reading the Act itself, that there was some such doubt in the Parliament of that time, as in our minds to-day, because the words of Section 34 are practically designed to meet the sort of difficulty to which my hon. Friends have alluded. Section 34 of the Act of 1926 contains these curious words:
Where, in the case of any trade, profession.… it is customary to make up accounts.
Then in paragraph (b) of the same Clause it says:
If no account for a period of one year was made up to date.… the Commissioners of Inland Revenue shall decide.
When you read the Bill, you find that the words:
customary to make up accounts"—
have been struck out, and in place thereof it is proposed to describe the period definitely, and it is defined as three years preceding the year of assessment. When you come to look at the rights of the person who may be aggrieved, it says in the Act:
If no account for a period of one year was made up.… the Commissioners of Inland Revenue shall decide"—

whereas, in the Bill, it says:
in any case to which the provisions of paragraph (a) do not apply the Commissioners of Inland Revenue shall decide.
Therefore, surely there is a very clear distinction between the rights of the aggrieved person under the existing Act and the provisions of the Clause which we are now discussing. I am quite certain that the Attorney-General desires, as much as anybody in the Committee, that there should be no grievances about this matter, and that he desires to do the fair thing by the man who may be aggrieved. Therefore, I would reinforce my hon. Friend's appeal that we should consider between now and Report whether the Bill really gives the aggrieved person the rights which the Attorney-General thinks it does. It is a matter of grave doubt. There is all the difference in the world between giving an appeal upon the assessment and upon the period, because the assessment may be perfectly right and there may be no ground of appeal whatever, but if the period as to which the assessment is made is all wrong, a man may suffer real hardship. I hope the right hon. Gentleman will give an undertaking to consider the matter further.

Question put, "That the words proposed to be left out stand part of the Clause."

The Committee divided: Ayes, 243; Noes, 116.

Division No. 348.]
AYES.
[9.38 p.m.


Adamson, Rt. Hon. W. (Fife, West)
Burgess, F. G.
Freeman, Peter


Adamson, W. M. (Staff., Cannock)
Burgin, Dr. E. L.
Gardner, B. W. (West Ham, Upton)


Addison, Rt. Hon. Dr. Christopher
Buxton, C. R. (Yorks. W. R. Elland)
Gardner, J. P. (Hammersmith, N.)


Aitchison, Rt. Hon. Craigie M.
Caine, Derwent Hall-
Gibbins, Joseph


Alexander, Rt. Hon. A. V. (Hillsbro')
Cameron, A. G.
Gibson, H. M. (Lancs. Mossley)


Ammon, Charles George
Carter, W. (St. Pancras, S. W.)
Gill, T. H.


Arnott, John
Charieton, H. C.
Gillett, George M.


Aske, Sir Robert
Chater, Daniel
Gossling, A. G.


Attlee, Clement Richard
Church, Major A. G.
Gould, F.


Ayles, Walter
Clarke, J. S.
Graham, Rt. Hon. Wm. (Edin., Cent.)


Baker, John (Wolverhampton, Bilston)
Cluse, W. S.
Gray, Milner


Baldwin, Oliver (Dudley)
Clynes, Rt. Hon. John R.
Grenfell, D. R. (Glamorgan)


Barnes, Alfred John
Cocks, Frederick Seymour
Griffith, F. Kingsley (Middlesbro' W.)


Batty, Joseph
Cove, William G.
Griffiths, T. (Monmouth, Pontypool)


Benn, Rt. Hon. Wedgwood
Daggar, George
Groves, Thomas E.


Bennett, Capt. Sir E. N. (Cardiff C.)
Dallas, George
Grundy, Thomas W.


Benson, G.
Dalton, Hugh
Hall, F. (York, W. R., Normanton)


Bentham, Dr. Ethel
Davies, Rhys John (Westhoughton)
Hall, G. H. (Merthyr Tydvil)


Bevan, Aneurin (Ebbw Vale)
Denman, Hon. R. D.
Hall, Capt. W. P. (Portsmouth, C.)


Bowen, J. W.
Dickson, T.
Hamilton, Mary Agnes (Blackburn)


Brockway, A. Fenner
Dudgeon, Major C. R.
Hamilton, Sir R. (Orkney & Zetland)


Bromfield, William
Duncan, Charles
Harbord, A.


Bromley, J.
Ede, James Chuter
Hardie, George D.


Brothers, M.
Edmunds, J. E.
Harris, Percy A.


Brown, C. W. E. (Notts. Mansfield)
Edwards, E. (Morpeth)
Hartshorn, Rt. Hon. Vernon


Brown, Ernest (Leith)
Egan, W. H.
Haycock, A. W.


Brown, Rt. Hon. J. (South Ayrshire)
Elmley, Viscount
Hayes, John Henry


Brown, W. J. (Wolverhampton, West)
Forgan, Dr. Robert
Henderson, Arthur Junr. (Cardiff, S.)


Henderson, Thomas (Glasgow)
Matters, L. W.
Smith, Alfred (Sunderland)


Henderson, W. W. (Middx., Enfield)
Messer, Fred
Smith, Frank (Nuneaton)


Herriotts, J.
Middleton, G.
Smith, Rennie (Penistone)


Hirst, G. H. (York W. R. Wentworth)
Milner, Major J.
Smith, Tom (Pontefract)


Hoffman, P. C.
Montague, Frederick
Smith, W. R. (Norwich)


Hopkin, Daniel
Morgan, Dr. H. B.
Snell, Harry


Horrabin, J. F.
Morley, Ralph
Snowden, Rt. Hon. Philip


Hudson, James H. (Huddersfield)
Morris-Jones, Dr J. H. (Denbigh)
Sorensen, R.


Hunter, Dr. Joseph
Morrison, Herbert (Hackney, South)
Stamford, Thomas W.


Isaacs, George
Morrison, Robert C. (Tottenham, N.)
Strachey, E. J. St. Loe


Jenkins, W. (Glamorgan, Neath)
Mort, D. L.
Strauss, G. R.


John, William (Rhondda, West)
Moses, J. J. H.
Sullivan, J.


Johnston, Thomas
Mosley, Lady C. (Stoke-on-Trent)
Sutton, J. E.


Jones, Rt. Hon Leif (Camborne)
Mosley, Sir Oswald (Smethwick)
Taylor, R. A. (Lincoln)


Jones, Morgan (Caerphilly)
Muggeridge, H. T.
Taylor, W. B. (Norfolk, S. W.)


Jowett, Rt. Hon. F. W.
Nathan, Major H. L.
Thorne, W. (West Ham, Plaistow)


Jowitt, Rt. Hon. Sir W. A.
Naylor, T. E.
Thurtle, Ernest


Kedward, R. M. (Kent, Ashford)
Newman, Sir R. H. S. D. L. (Exeter)
Tillett, Ben


Kennedy, Thomas
Noel Baker. P. J.
Tinker, John Joseph


Kenworthy, Lt.-Com. Hon. Joseph M.
Oliver, George Harold (Ilkeston)
Toole, Joseph


Kirkwood, D.
Oliver, P. M. (Man., Blackley)
Tout, W. J.


Knight, Holford
Owen, H. F. (Hereford)
Townend, A. E.


Lansbury, Rt. Hon. George
Palin, John Henry
Trevelyan, Rt. Hon. Sir Charles


Lathan, G.
Paling, Wilfrid
Vaughan, D. J.


Law, Albert (Bolton)
Parkinson, John Allen (Wigan)
Viant, S. P.


Law, A. (Rosendale)
Pethick-Lawrence, F. W.
Walkden, A. G.


Lawrence, Susan
Picton-Turbervill, Edith
Walker, J.


Lawson, John James
Pole, Major D. G.
Wallace, H. W.


Lawther, W. (Barnard Castle)
Potts, John S.
Wallhead, Richard C.


Leach, W.
Price, M. P.
Watkins, F. C.


Lee, Frank (Derby. N. E.)
Ramsay, T. B. Wilson
Watson, W. M. (Dunfermline)


Lee, Jennie (Lanark, Northern)
Rathbone, Eleanor
Wellock, Wilfred


Lees, J.
Richards, R.
Welsh, James (Paisley)


Lewis, T. (Southampton)
Richardson, R. (Houghton-le-Spring)
West, F. R.


Lindley, Fred W.
Riley, Ben (Dewsbury)
Westwood, Joseph


Lloyd, C. Ellis
Riley, F. F. (Stockton-on-Tees)
White, H. G.


Logan, David Gilbert
Ritson, J.
Whiteley, Wilfrid (Birm., Ladywood)


Longbottom, A. W.
Romeril, H. G.
Whiteley, William (Blaydon)


Longden, F.
Rosbotham, D. S. T.
Wilkinson, Ellen C.


Lovat-Fraser, J. A.
Rowson, Guy
Williams, David (Swansea, East)


Lowth, Thomas
Salter, Dr. Alfred
Williams, Dr. J. H. (Llanelly)


Macdonald, Gordon (Ince)
Sanders, W. S.
Williams, T. (York, Don Valley)


MacDonald, Rt. Hon. J. R. (Seaham)
Sandham, E.
Wilson, C. H. (Sheffield, Attercliffe)


MacDonald, Malcolm (Bassetlaw)
Sawyer, G. F.
Wilson, J. (Oldham)


McElwee, A.
Scrymgeour, E.
Wilson, R. J. (Jarrow)


McEntee, V. L.
Scurr, John
Winterton, G. E. (Leicester, Loughb'gh)


McKinlay, A.
Sexton, James
Wise, E. F.


Maclean, Sir Donald (Cornwall, N.)
Sherwood, G. H.
Wood, Major McKenzie (Banff)


McShane, John James
Shield, George William
Wright, W. (Rutherglen)


Malone, C. L'Estrange (N'thampton)
Shillaker, J. F.
Young, R. S. (Islington, North)


March, S.
Shinwell, E.



Marcus, M.
Short, Alfred (Wednesbury)
TELLERS FOR THE AYES.—


Markham, S. F.
Simmons, C. J.
Mr. Charles Edwards and Mr. B.


Marley, J.
Sinkinson, George
Smith.


Mathers, George
Sitch, Charles H.



NOES.


Acland-Troyte, Lieut.-Colonel
Croft, Brigadier-General Sir H.
Henderson, Capt. R. R. (Oxf'd, Henley)


Ainsworth, Lieut.-Col. Charles
Croom-Johnson, R. P.
Heneage, Lieut. Colonel Arthur P.


Albery, Irving James
Davidson, Rt. Hon. J. (Hertford)
Herbert, Sir Dennis (Hertford)


Atkinson, C.
Davidson, Major-General Sir J. H.
Hills, Major Rt. Hon. John Waller


Balfour, George (Hampstead)
Davies, Dr. Vernon
Hurd, Percy A.


Balfour, Captain H. H. (I. of Thanet)
Davies, Maj. Geo. F. (Somerset, Yeovil)
Kindersley, Major G. M.


Balniel, Lord
Davison, Sir W. H. (Kensington, S.)
King, Commodore Rt. Hon. Henry D.


Beaumont, M. W.
Dixon, Captain Rt. Hon. Herbert
Lamb, Sir J. Q.


Betterton, Sir Henry B.
Duckworth, G. A. V.
Lane Fox, Col. Rt. Hon. George R.


Boothby, R. J. G.
Edmondson, Major A. J.
Law, Sir Alfred (Derby, High Peak)


Bourne, Captain Robert Croft
Erskine, Lord (Somerset, Weston-s. M.)
Leighton, Major B. E. P.


Boyce, H. L.
Ford, Sir P. J.
Lewis, Oswald (Colchester)


Bracken, B.
Forestier-Walker, Sir L.
Llewellin, Major J. J.


Griscoe, Richard George
Glyn, Major R. G. C.
Locker-Lampson, Rt. Hon. Godfrey


Buckingham, Sir H.
Graham, Fergus (Cumberland, N.)
Long, Major Eric


Butler, R. A.
Grattan-Doyle, Sir N.
Maitland, A. (Kent, Faversham)


Cadogan, Major Hon. Edward
Greene, W. P. Crawford
Makins, Brigadier-General E.


Carver, Major W. H.
Grenfell, Edward C. (City of London)
Margesson, Captain H. D.


Cautley, Sir Henry S.
Gretton, Colonel Rt. Hon. John
Marjoribanks, E. C.


Chadwick, Capt. Sir Robert Burton
Hacking, Rt. Hon. Douglas H.
Meller, R. J.


Chapman, Sir S.
Hall, Lieut.-Col. Sir F. (Dulwich)
Monsell, Eyres, Com. Rt. Hon. Sir B.


Churchill, Rt. Hon. Winston Spencer
Hanbury, C.
Morrison, W. S. (Glos., Cirencester)


Cobb, Sir Cyril
Hannon, Patrick Joseph Henry
Nicholson, O. (Westminster)


Colville, Major D. J.
Hartington, Marquess of
O'Connor, T. J.


Courtauld, Major J. S.
Harvey, Major S. E. (Devon, Totnes)
Ormsby-Gore, Rt. Hon. William


Crichton-Stuart, Lord C.
Haslam, Henry C.
Percy, Lord Eustace (Hastings)




Peto, Sir Basil E. (Devon, Barnstaple)
Somerville, A. A. (Windsor)
Wardlaw-Milne, J. S.


Pownall, Sir Assheton
Somerville, D. G. (Willesden, East)
Warrender, Sir Victor


Ramsbotham, H.
Southby, Commander A. R. J.
Waterhouse, Captain Charles


Remer, John R.
Spender-Clay, Colonel H.
Wayland, Sir William A.


Roberts, Sir Samuel (Ecclesall)
Stanley, Maj. Hon. O. (W'morland)
Wells, Sydney R.


Ross, Major Ronald D.
Steel-Maitland, Rt. Hon. Sir Arthur
Williams, Charles (Devon, Torquay)


Russell, Alexander West (Tynemouth)
Sueter, Rear-Admiral M. F.
Windsor-Clive, Lieut.-Colonel George


Salmon, Major I.
Thomas, Major L. B. (King's Norton)
Womersley, W. J.


Samuel, A. M. (Surrey, Farnham)
Thomson, Sir F.
Wood, Rt. Hon. Sir Kingsley


Samuel, Samuel (W'dsworth, Putney)
Tinne, J. A.
Worthington-Evans, Rt. Hon. Sir L.


Sandeman, Sir N. Stewart
Train, J.



Shepperson, Sir Ernest Whittome
Turton, Robert Hugh
TELLERS FOR THE NOES.—


Sinclair, Col. T. (Queen's U., Belfst)
Vaughan-Morgan, Sir Kenyon
Major the Marquess of Titchfield


Smith-Carington, Neville W.
Wallace, Capt. D. E. (Hornsey)
and Major Sir George Hennessy.


Smithers, Waldron
Ward, Lieut.-Col. Sir A. Lambert



Question, "That the Clause stand part of the Bill," put, and agreed to

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. CHURCHILL: I beg to move, "That the Committee do report Progress and ask leave to sit again."
I do this in order to put myself in order so that no remarks which I may now make may impinge upon any discussion which may take place upon the Clause. We have had a very useful day's discussion in which there has been a great deal of good work and good temper displayed, and a certain amount of give and take. The Government have allowed the House of Commons to participate in moulding the legislation for which we are all jointly responsible, and, therefore, seeing that the Prime Minister is in his place, I should like to ask, what are the views of the Government as to the distance we should get to-night and the hour at which we should endeavour to terminate our proceedings? I ask this question early because, whatever the decision is, it is most important that we should utilise the available time to the best possible advantage. If it is decided that we are to make a very long effort to-night, we can examine everything in a most thorough and searching manner, but if, on the other hand, there is a desire to terminate the proceedings at a time which will not expose Members to extreme inconvenience, it will certainly require a great deal of care on the part of Members on both sides of the Committee in order to compress our discussions and make them as fruitful as possible. Perhaps the Attorney-General, speaking for the Government, or the Prime Minister, will let us know what they have in mind. I wish to make it clear that no agreement of any sort or kind has been entered into, either across the Floor of the House or behind the Chair, but we are entitled to ask what are the wishes
of our masters in these matters, so that we may arrive at an arrangement for the common good?

The PRIME MINISTER (Mr. Ramsay MacDonald): I respond very gladly to the invitation which has been given to us by the right hon. Gentleman. I do not like to aid and abet in the neglecting of duty of a very thorough and penetrating critic of the Clauses. At the same time, all we want to-night is to get to the end of Clause 16. When we have got Clause 16, which fact has been mentioned before, we shall be prepared to move to report Progress.

Mr. CHURCHILL: I am bound to say that the declaration of business which the Prime Minister has made does not seem to us on this side of the Committee to be unreasonable in view of the progress which has been made to-night and considering the postponement of Clause 12. It seems to us on this side of the Committee that we ought to be able to make a very well compressed examination of the four Clauses which now lie before us. I beg to ask leave to withdraw the Motion to report Progress.

Motion, by leave, withdrawn.

CLAUSE 14.—(Provision as to computation of profits and gains for purpose of charge to tax in two years next after the year in which trade, etc., set up or commenced.)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

The DEPUTY-CHAIRMAN: I think that it would be better to have a general discussion on this Clause as we had on the last Clause.

Mr. A. M. SAMUEL: Clause 14, as far as I understand the position as stated
by the learned Attorney-General, is a corollary to Clause 13. Clause 13 starts the business, so to speak, and Clause 14 comes in, as it were, when the business is running down.

The ATTORNEY-GENERAL: This Clause does not deal with the beginning of the business, but with hardship which may arise.

Mr. SAMUEL: The hon. and learned Gentleman said on the Budget Resolution:
I can explain it if it is desirable. It is very difficult to follow without writing it out on paper. You really want a blackboard.
In the next sentence he said:
It is quite plain.
What did he mean? A question was put to the Chancellor of the Exchequer by my right hon. Friend the Member for Epping (Mr. Churchill). My right hon. Friend said:
How will this Clause affect business? We want to know what it will do.
The Chancellor of the Exchequer said:
It is very difficult to give an answer to that. On the whole it is expected to help the development of business."—[OFFICIAL REPORT, 6th May, 1930; col. 844, Vol. 238.]
I should like to ask the Attorney-General what the Chancellor of the Exchequer meant when he said that it was likely to help the development of business. As [...] see the position, the Clause operates in this way. The second and third year have to be linked together for the purposes of assessment. Why should not a man be allowed to say in the third year in what manner he should be assessed? I do not think that there is very much that is contentious in the Clause, and I hope that the Attorney-General will give the explanation for which we ask.

Sir H. BUCKINGHAM: I am afraid that I cannot agree that the Clause should stand part of the Bill, because I have a notice on the Paper asking the Committee to postpone this Clause, at all events, till the end of the new Clauses. I hope that I shall be able to give very good reasons for this suggestion. My hon. Friend said that this Clause is intended to be a concession to taxpayers. As such, it is a very pleasant chapter in this terrible tale of taxation. I have had an opportunity of having some conversation with my hon. Friend the Financial
Secretary upon this Clause, and I endeavoured to point out to him certain unfair anomalies which would come from the Clause, and I hope to show to the Committee also the unfairness of the Clause as it is at present drafted.
I am sorry that I find myself quite incapable of drafting any Amendments to the Clause which might meet the points which I am going to raise, and I sympathise with some of my hon. Friends who have Amendments on the Order Paper dealing with this Clause, because they have, obviously, met with the same difficulty that confronted me, and have put down Amendments which, in some respects, if they were carried out would do away with the whole of the advantage that is intended to be given to the taxpayers. I hope to show that this Clause requires more consideration and that it ought to be postponed. I trust that in my conversation with the Financial Secretary I made my point clear, and that he is now in agreement with me. This Clause, as drafted, undoubtedly gives a concession to new businesses, and the proviso at the end of Sub-section (2) is a very powerful agent in giving that concession, although it is the very thing that some of my hon. Friends desire to omit, the result being that whereas by omitting the proviso we should destroy any benefit attaching to the Clause, yet by leaving in the proviso I hope to prove that we shall be doing an unfair action towards certain classes of taxpayers.
Although this Clause will benefit new businesses, there is one class of new business that it will not benefit. I refer to those occasions when a change of partnership takes place in a business. Under the Income Tax Acts a change of partnership does not constitute a new business and, therefore, it does not benefit from any consequent adjustments that there may be in connection with new businesses. Let me take a case in point. Let me take the case of a partnership, and see how it would work out under the Clause as proposed. Messrs. A, B and C in the first year of their business make £10,000 profit. They are assessed upon the actual profit of that first year. In the second year of business they make £1,000 profit and, naturally, they give notice under this Clause that they should be assessed for the actual profit of that second year and for the third year also.
At the end of the second year partner "A" either dies or retires, leaving Messrs. B and C to carry on the business. During the third year, Messrs. B and C make £30,000 profit. Obviously, Messrs. B and C will take advantage of the terms of the proviso and will give notice cancelling the notice previously given by Messrs. A, B and C. As the result of revoking the notice given by A, B and C there would be a re-assessment and A, B and Co. would be in the position of not having given any notice at all. The result would be that the A, B and C partnership would be re-assessed on the actual profit of the first year, £10,000, and in the second year on the profits of the preceding year which would be another £10,000. Consequently, they would be assessed on £20,000, although they had only made £11,000 profit in the first and second years. I hope that I have made the point clear. [HON. MEMBERS: "Oh!"] Well, it is a very difficult Clause to discuss.
10.0 p.m.
Let me re-state the position. A, B and C are partners. In the first year they make £10,000 profit, and they are assessed upon the actual profit of the first year. In the second year they make £1,000 profit and, therefore, they give notice asking to be assessed on the actual profit of the second year and the third year. At the end of the second year "A" dies or retires, leaving B and C, who in the third year make £30,000 profit. Under the notice which A, B and C have given the partnership would be assessed on the £1,000 profit and on the £30,000 profit. Obviously, that would not satisfy B and C. They immediately revoke the notice which A, B and C have given under the proviso, and the result is that the A, B and C original partnership will have an additional assessment made upon them for the actual profits of the first year plus the profit of the first year again, which would be the preceding year's profit.
I do not know whether I have made the point clear yet. It is exceedingly difficult to do so. That is obviously a case which requires consideration, and it would appear that the whole question of the effects upon partnerships have not been taken into consideration in framing the Clause. A change in partnership does not constitute a new business under the
present law, and I have suggested to the Financial Secretary that the way to get over this anomaly, about which, so far as the figures are concerned, there is no possible question, is that changes in partnerships should in future be treated in the same way as the setting up of a new business. That would get over these difficulties and would simplify the matter very much. I know that there is a difficulty about it. I know that if changes of partnership were put upon the same basis as the establishment of new business there would be the possibility of a charge being put upon certain taxpayers, because in the winding up of a partnership and the establishing of a new one certain adjustments would have to be made which might necessitate a charge upon the partners in that partnership. Therefore, a charge might be put upon the taxpayers, and the House could not assent to that without a Resolution; but I am inclined to think that the Inland Revenue officials are ingenious enough to suggest a way out of the difficulty which would allow action to be taken for the present year of a temporary character, so that when next year comes along, and the new Budget Resolutions are before the House, the suggestion that I have made, if it were considered advisable, could be carried out.
That is not my only criticism of Clause 14. Under Sub-section (4), in the case of the death of a partner, in consequence of the Clause very great difficulties will arise, which would also be settled by my suggestion of treating new partnerships as new businesses. As the Clause stands, in the case of the death of a partner the executor of that partner's estate cannot possibly know for two years, and in an extreme case for three years, what the liability of the dead partner is. He has died in the second year, but his successor does not have to give notice until the end of the third year whether or not he is going to revoke the notice which his partner has given under the Clause. There may be resulting liabilities on the dead partner in consequence of the revocation of the notice given by the surviving partners. Therefore, no executor can be sure for two years, at any rate, what the liabilities of the estate would be. That is a serious position for an executor, and I
hope the Chancellor of the Exchequer will be able to obviate the difficulty.
I admit that this Clause is intended to be a concession, and that it is so under certain circumstances, but I suggest that the extra year that is given to new businesses for the adjustment of their accounts is insufficient, and that a period of five years would be very much fairer and more satisfactory. Anybody, I think, would say that three years is not long enough for a business to show whether or not it is to be a sound paying business, but if the period were extended to five years there would be no reason for saying at the end of five years that there was any hardship arising to that firm, when the end of the period of choice had come. At the end of the third year they might find themselves in the position of making a lot of money, and then making another large sum in the fourth year, and having to pay twice because of the large sums they are making. These inequalities would not be so likely to arise if the concession were extended to five years.

Mr. PETHICK-LAWRENCE: The hon. Member for Guildford (Sir H. Buckingham), who has just addressed us on this very complicated Clause, was good enough to come, a few days ago, and explain the points that he intended to raise, and I have been able, therefore, to understand them more fully than I could have done merely by hearing his speech, clear though it has been in itself. I understand that he wishes to postpone this Clause, but I suggest that there is no ground for taking that course.

The CHAIRMAN: The Question is, "That the Clause stand part of the Bill."

Mr. PETHICK-LAWRENCE: I did not understand that.

Sir H. BUCKINGHAM: I was under the impression that I was talking on my own Amendment to postpone the Clause.

Mr. A. M. SAMUEL: On a point of Order. I think you are under a misapprehension, Sir.

The CHAIRMAN: The Deputy-Chairman informed me that he had put the Question, "That the Clause stand part of the Bill."

Mr. PETHICK-LAWRENCE: I think I can probably satisfy the hon. Member. This Clause is in the nature of a concession to the taxpayer, because it was found under the existing law that the option that the taxpayer had was not wholly satisfactory. I do not think this is the place to go into the precise figures of years 1, 2, and 3, but under the existing law the taxpayer has the option to decide in the second year. It has been submitted that there might be changes in which, owing to high profits in the third year, the option exercised in the second year would prove very detrimental to the firm, and the Government were asked if they would make a further concession, so that there should also be an option in the third year. The hon. Member wants that concession extended, not merely to the third, but to the fourth and fifth years, but I am afraid the Government cannot go beyond the concession which is being made in this Clause, which is a very considerable concession.

Mr. WARDLAW-MILNE: Is it not true that the Government at the same time are taking the second and third years together?

Mr. PETHICK-LAWRENCE: I am coming to that. The hon. Member for Guildford asked that we should not merely allow an option in the third year, but that we should allow the option to go on to the fourth and fifth years, and I say that the Government cannot see their way to do more than is being done by this Clause on that point, The concession is limited in this way, that the taxpayer cannot have the best of both worlds. What we are offering is that in the third year we shall have the choice of which world he wants to get the best of, but he cannot at one and the same time get the best of both worlds. He can either in the third year confirm the decision that he made in the second year, one way or the other, or he can reverse the decision of the second year; and, therefore, so far as the second and third years are concerned, they will both stand on the same principle that he adopts in the third year. As far as the firm is concerned, that is quite adequate, and the concession is one which is very valuable,
because he can choose in the third year whether he will take one method or the other.
The hon. Member is quite satisfied from the point of view of the firm, but he says that in the case where there is a change of partnership owing to the death of one of the partners, or some other cause, that as between partner A and partner B this Clause may work considerable hardship. The suggestion he made for dealing with that case was that in all such cases firms should be in a position to start business afresh. I do not think that would be very satisfactory. It would be more satisfactory, on the average, to the Exchequer than to the taxpayer, and if we incorporate it in the Finance Bill we should, I think, get considerable complaints from taxpayers for taking that course. Undoubtedly the point he has raised is of some substance. It is perfectly clear that as between partner A and partner B there may be some ground of complaint as a result of the working of this Clause.
There is also the further point that a considerable time might elapse in the case of the death of a partner and that during all that time there would be a certain amount of uncertainty as to the assessment. That is a comparatively small point, for which we are looking for a solution. We have not found an exact solution at the moment but we are hoping to meet that meticulous point between now and Report, and if we can find such a solution we propose to bring it forward in the form of an Amendment. If we cannot find any such solution we shall present the Clause as it stands to the House. It is a concession to the taxpayer, and there will be some loss of revenue as a result of it. We are not anxious to press it, and if it is found that this small blemish cannot be put right we have no great desire that the Clause should be carried. Still, even as it stands, it will be better for these people than no Clause at all. I feel confident, however, that we shall be able to meet the point of difficulty, and we propose to bring it forward as an Amendment which can be discussed on Report stage.

Mr. ATKINSON: It is always interesting to know that anything which will be of benefit to the taxpayer is of no interest to the Government. It is very
interesting to know that this Clause is intended to be a concession to the taxpayer, but I should be very much obliged if the Financial Secretary or the Chancellor of the Exchequer would explain what Sub-section (4) means and in what way it is a benefit to the taxpayer. The Clause provides that in the case of the death of a person who, if he had not died would have been liable to the tax, the tax for which he would have been chargeable shall be assessed and charged upon his executors. In other words, instead of merely taxing people who are alive, if someone dies his estate has to be taxed in the same way as it would have been taxed if he had lived. I cannot see that that is a concession in favour of the taxpayer, even the dead taxpayer. The Chancellor of the Exchequer must be referred to some particular set of circumstances which are in the minds of the Government, and I shall be very much obliged if some explanation can be given of the kind of case that the Clause is intended to cover.

Mr. MAITLAND: This Clause has been referred to by several speakers as a concession, but I think it is rather of the nature of an attempt to remedy an injustice. The fact of the matter is that this Clause is an attempt to remedy Section 29 of the Finance Act of 1926. Under that Section there was undoubtedly an injustice to the taxpayer. A number of taxpayers were called upon to pay taxes in respect of profits which were more than the profits they had made. I am sure that that was not the intention of this House when the Section was passed. I rose to ask the Chancellor of the Exchequer whether, between now and Report, he will consider the possibility of amending Sub-section (6), which reads:
This section shall apply in relation to trades, professions or vocations set up or commenced in the year 1928–29 or any subsequent year of assessment.
What happened in the past was that businesses, after the 5th of April, 1928, were paying more taxes than were necessary upon profits which had been made. The demand applied to profits from 5th April, 1927. I ask the Chancellor of the Exchequer to consider whether, in remedying this injustice, he cannot "go the whole hog" and do an act of justice to all taxpayers who have been adversely
affected to an extent which was not in the minds of Members of this House, and alter the year for assessment to which this shall relate from the year 1929 to the year 1927–28.

Major LLEWELLIN: The words in Sub-section (1) of Clause 14 referred to "trade, profession or vocation." Although the discussion has centred largely round partners, it seems to me that there is no mention specifically of partnership in this Clause, and that the Clause will apply to any trade that is set up. If a trade or business, upon a man's death, is sold by the executors, that business continues. Had the man who originally owned it been alive, he would have been liable for tax for the third year on the profits of that trade. Under Sub-section (4) his executors are liable for the taxation for which he himself would have been liable had he lived, and, the business having been sold, somebody else apparently also becomes liable for taxation on profits from that same trade. Sub-section (4), I submit, makes two different parties liable for taxation on the same profits. The Sub-section ought to be limited in some way because I think it clearly puts that liability on the executors but, if I am wrong on that point, I submit that it will certainly have this effect. In the case of a trade or business which goes on after the owner's death, the executors will not know until two years afterwards what their liabilities are going to be under this provision. They ought to be given the opportunity to settle these affairs within a year, the ordinary period within which executors are expected to settle all matters relating to the assets of a deceased person. It is right that they should pay taxation on the profits made by the man when he was alive, but they should not be charged on any profits accruing from the business after the man's death unless they are actually carrying on the business themselves. I hope that this point will be gone into before the Report stage, and that some limitation will be put upon Sub-section (4) to meet the objections which I have indicated.

Mr. WARDLAW-MILNE: I think the hon. and gallant Member for Uxbridge (Major Llewellin) is mistaken in thinking that this Sub-section involves an extra liability. I do not read it in that way, but I think there is every probability
that it will create considerable confusion in the minds of executors and will tend to make the settlement of estates extremely difficult in cases where a number of persons are connected with a partnership. I cannot think that it is beyond the ability of the Financial Secretary to find words which would make the position clear. I am not going to press the matter because I understand that the Government have promised to consider it before the Report stage, but I would point out that, as the Sub-section stands, it appears to make the winding-up of partnership estates a very complicated and extended process. I am perfectly certain that such is not the wish of the Government, and I hope that the Financial Secretary will not take refuge in the idea that suitable words cannot be found to make the meaning of the Government plain. The mantle of the permanent official seems to have fallen on the hon. Gentleman when he says that this proposal might result in a slight loss of revenue to the Treasury and, therefore, if there is any real opposition, the Government may not feel it necessary to press it at all.
It is quite possible that this will cause a small loss to the Revenue, but I look upon it as a concession to the taxpayer and on that account I do not want to press the hon. Gentleman. I think that he wants to get the thing perfectly clear and to do the best that he can. In connection with the point on which I interrupted him, may I ask him again to look into that before the Report stage. Under the guise of relief, this Clause restricts a taxpayer by compelling him to take the second and third years together. The Treasury would lose no more money, in fact might gain a little, under the present position as laid down by the Clause, if the taxpayer were allowed to deal with each of the three years separately. I do not agree with the suggestion to carry it to the fourth or fifth year, but as far as the first three years are concerned, I cannot see that the Treasury would lose anything by allowing the taxpayer, if he desires to treat the profits of each of the three years separately.

Mr. PETHICK-LAWRENCE: That is provided for.

Mr. WARDLAW-MILNE: I do not press it, because the Government are going to consider the matter, but these points should be cleared up.

Mr. CROOM-JOHNSON: I am completely mystified by Sub-section (4). What the Government are offering to the taxpayer is that in respect of the new business, the notional year in respect of which the taxpayer is going to be taxed is to be during the second and third years left to the option of the taxpayer. He can exercise that option, but if he exercises it, it is to be exercised, whether he does it in the second or third year, for both years. The Sub-section goes on to devise something which is a complete departure in Income Tax law, namely, that when that option has been exercised, if the taxpayer dies at the end of the second year, you are nevertheless to treat the income which comes to his estate as though it were income which fell under this scheme, and you are going to charge it upon the executors. That is something entirely new. The Sub-section in its present form is entirely unworkable, because, as so often happens when people are considering making a new departure, they do not visualise all the different changes and circumstances which may arise. It has been pointed out already that the Sub-section is not confined to partnership. Take the case of a single individual, a member of my own profession, for example, who happens to die at the end of the second year. His business naturally ceases; there is nothing the executors can carry on, but under this Sub-section I am not at all sure—I invite the Financial Secretary to give it his consideration—whether it might not be possible for some extremely astute Income Tax official to say that there might be an assessment upon the executors of the deceased member of the Bar in respect of those earnings which would have been chargeable to tax if he had survived. Take the case of the business which is sold at the end of the second year, let us suppose, to the son of the gentleman who dies at the end of the second year. The son carries on the business, and what will happen? Are the executors to be charged in respect of the actual earnings of that business for the third year?

Mr. PETHICK-LAWRENCE: indicated dissent.

Mr. CROOM-JOHNSON: The Financial Secretary shakes his head, but is that the fact under the Sub-section? At the same moment, the son is carrying on the business, and is there not a possibility of some Income Tax assessor coming down upon the son, and saying, "Of course, it is true that the earnings made in this business are going to be treated as notional earnings with regard to your father's estate, but, so far as you are concerned, it is your business, and you are carrying on for the first year, and we propose to tax you for that year"? I am not suggesting that these observations are necessarily right, but I can see the possibility of very considerable disturbance, and many claims being made, and I suggest that this Sub-section might be considered before we reach the Report stage. I am puzzled by the whole Section, but then, in common with so many other people, I am very often mystified by the problems under the Income Tax Acts which one has to consider and obtain decisions upon. I am ready to be told that the cases which I visualise are not possibilities, but at all events there is a real doubt as to whether this Sub-clause achieves any purpose which is really fair to the taxpayer, and whether there is not a possibility that, in the guise of a relief against a real injustice, we may not put the taxpayer in a worse position than he was in at the beginning. The Financial Secretary says the taxpayer does not want to have the best of both worlds, but it rather looks as though, having gone to the next world, he is going to be chased there and taxed after all.

Mr. PETHICK-LAWRENCE: I think I can set the minds of hon. Members at rest with a very few words. The whole of this Clause applies to the options exercised by the firms in years two and three. We are dealing only with businesses in their first three years. The only case under the Clause as it stands where there will be any additional charge on the partners in the second year is the most unusual case of there being a very large profit in the first year, a very small profit in the second year and another very large profit in the third year. Those cases will be exceedingly few; and even in that position the only cases in which these difficulties will arise are cases where there
has been a death or a change of partnership after the end of the second year and before the end of the third year. The number of cases will be very few indeed. With regard to sub-Clause (4), that comes in only where a man dies after the end of the second year, where all those conditions to which I have referred exist, and where his partner, at the end of the third year, wants to reverse the option exercised in the second year. In those circumstances there may be some small charge falling on the partner who is dead. It is the endeavour of the Government to make some modification whereby even these rare difficulties will not occur.

Major LLEWELLIN: May I ask where in this Clause it says that it is limited to partnerships?

Mr. PETHICK-LAWRENCE: It is only in the case of a partnership that the difficulty arises. If a business is sold, if the executors sell the business, it is a new business, and the procedure would be wholly different.

Sir BASIL PETO: If the Financial Secretary to the Treasury had only made his first reply immediately after my hon. Friend the Member for Guildford (Sir H. Buckingham) had made his speech, I think we might have saved some time. This is a question which requires very carefully looking at all round. The debate has very wisely been confined to legal Members of the House, and to those Members who get their living by the interpretation of this and other complicated Acts of Parliament, and of course they are better qualified to deal with legislation like this which gives a very small concession wrapped up in a very large amount of sacking in the shape of legal verbiage.
We have had a definite point put on Sub-section (4) dealing with the case of death, and the Government have promised to consider that point on the Report stage. I would like to point out to the Financial Secretary that there is a grave doubt that under the Clause as it is worded an individual may, by reason of his connection with a partnership, whether he dies or not, be made responsible for a larger sum than he has earned. To meet this point, I suggest that the right hon. Gentleman should accept a
proviso to the effect that nothing should operate to over-ride Rule 11 of Section 31 of the Finance Act of 1926, and that the provisions of Rule 11 should operate in every case. If such a provsion were put in this Bill, it would make it clear that in all these changing circumstances, where one partner drops out and another comes in, or one partner dies, in no case should any individual be charged Income Tax at a higher rate of profit than he has in fact earned. I hope we shall be able to get this little solatium for the taxpayer without doing anybody an injustice.
I ask the Chancellor of the Exchequer to consider the case in which one of the partners in a partnership dies and the executors have to deal with the question of a change in the partnership. In that case, I think that the old rule laid down in Rule 11 of Income Tax law should operate, and that no one should be charged at too high a rate. If that were done, the taxpayer would, in the words of the right hon. Gentleman, get the best of both worlds. On these grounds, I hope the Financial Secretary will very seriously consider making it quite clear that nothing in this Section shall operate counter to the provisions already existing for the protection of the taxpayer, and which have been in operation for such a long time. I hope the Financial Secretary will agree with me when I say that the taxpayer is entitled to all the protection he has had hitherto, and I trust that he will be given this small concession as well.

Mr. C. WILLIAMS: I only wish to ask two questions on this point. As I and some of my friends see Sub-section (4), we are not certain whether it is confined to partners in a firm or not, and I have reason to think that it might be made clear if the first line read:
In the case of the death of a person who is a partner in a firm.
That might clarify a great many of the doubts which have been raised on this side of the Committee, and, if it could be done on Report, I believe it would help a good deal. I should also like to ask one simple question in connection with the whole Clause. We have been told that this is a concession, and that the Treasury will lose money. I have never heard of the Treasury making a concession unless they had an estimate of what the concession would cost, and I
think we are entitled to be told what the cost will be, because then we should know roughly what is the value of this Clause.

Lieut.-Colonel HENEAGE: I hope that the Chancellor of the Exchequer will not let us know how much it costs, because we do not approve of the system of looking a gift horse in the mouth, but receive the concession with thanks. I should like to ask whether the words "trade, profession or vocation" include agriculture. There are a certain number of agricultural partnerships which this concession would considerably benefit. I should also like to know how the question of Schedule A will be dealt with. Schedule A still remains, and if this Clause would apply to Schedule A, I think it would be a considerable concession.

Mr. CHURCHILL: We want to get on, and I hope we may hear from the Chancellor of the Exchequer that he will consider the point as to the further definition of the word "person," by inserting the words "person who is a partner in a firm," or some such words. That question might, perhaps, be considered between now and Report, with a view to making it clear that the intention is to pursue that share of the collective liability of a firm which properly attaches to a partner in the firm, but not to pursue in respect of Income Tax anything which trenches beyond those limits of actual income which hitherto have been the sole basis upon which the tax was levied. There is a considerable point of principle there. I will not ask the Chancellor of the Exchequer for any final or decided statement, but if he would indicate that the point will receive careful attention between now and Report, with a view to the localisation to which I have referred, I think it would enable us to quit this Clause now without further discussion.

Mr. P. SNOWDEN: I am always quite ready to consider any suggestion for the purpose of meeting a difficulty or making matters more clear, and certainly the point which the right hon. Gentleman has mentioned shall be considered.

CLAUSE 15.—(Amendment of Rule 11 of Rules applicable to Cases I and II of Schedule D.)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. A. M. SAMUEL: Here is a Clause the meaning of which took me the best part of half a day to understand. It says:
The proviso to paragraph (1) of Rule 11 of the Rules applicable to Cases I and II of Schedule D shall, in relation to cases where the change occurs after the fifth day of April, nineteen hundred and thirty, have effect as if for the words 'three months after the change took place' there were substituted the words 'twelve months after the change took place.'
What does all that mean. It took me half a day to find out what it meant. I found I had to go back to the Act of 1926 to which there is no reference in the margin of the Bill. I found that Section 32 of the Finance Act, 1926, referred to a rule in an earlier enactment. The rule referred to in Clause 15 here enacts that if after the fifth day of April, 1928, a change occurs in a partnership by reason of certain circumstances, notice must be given within three months after the change. By this Clause it is evident that the Chancellor of the Exchequer has seen the difficulty of the taxpayer, and instead of three months has said there shall be an extension to 12 months for the notice. There is a further injustice which, I suggest, should now be remedied. The Chancellor has admitted that there is an injustice against the subject in only allowing three months for notice, and has extended it to 12 months. Certain representations have been made to me by a body which represents a great number of firms in this country—the Association of British Chambers of Commerce—that there is another injustice, and that it could be got over in this way. I suggest that the tax payable shall in future be put on the following basis. I accept the concession made in the Clause, but a further concession could be made. I suggest that the basis should be as though the business had been discontinued at the date of the change, and a new business set up. The Clause meets this suggestion as far as current assessments are concerned, I agree, but it should include cases where changes have occurred since
the date laid down since the Act of 1926, namely, since 5th April, 1928. I think it should be so amended and that the Chancellor should give the matter his consideration so that if business alterations have taken place since 1928 the Clause should apply as from that date. I should like to hear what the Chancellor of the Exchequer has to say on the point.

Mr. WARDLAW-MILNE: Will the Chancellor, when he is considering the point my hon. Friend has raised, consider whether he cannot abolish this legislation by reference, which makes it so extremely difficult to follow, and whether, before the Report stage, he will have the Clause re-drafted to make it perfectly clear, instead of having to refer to previous Acts.

Mr. P. SNOWDEN: I am afraid I cannot promise between now and Report to solve a problem which has baffled every legislator, I suppose, from the time legislation was first instituted, and that is to abolish legislation by reference. The point here is a very simple one. It involves nothing more than extending the option from three months to twelve.

Mr. CHURCHILL: I do not think we can ask more than that on a Clause which is definitely a concession to the taxpayer. It would, I think, cost nothing to the Revenue to consider a more detailed application of the concession. That, I understand, will be done.

CLAUSE 16.—(Provision as to relief front double taxation on certain profits from sale of goods.)

Mr. CHURCHILL: On a point of Order. Before any Amendment is brought forward upon this Clause, it might simplify our proceedings if the Government would give us a simple explanation, in ordinary parlance of the purpose, scope and intention of the Clause, and that our dscussion should then proceed upon the basis of knowledge of exactly what the Government have in mind, and the points to which they attach importance. We can see whether the points which cause us difficulty can be adjusted rapidly to their point of view.

The ATTORNEY-GENERAL: The trouble that has arisen is as follows. If a non-resident derives profit from trade carried on within the country through an agent, the non-resident is taxable. Prior to 1915, it was a condition of his taxability that the agent should be actually in receipt of the profits. Now that does not apply, and if you find a non-resident trading here through au agent, that makes the non-resident liable to tax. It might seem very simple to determine whether or not a non-resident is carrying on business here, but in truth and in fact a great deal of legal ingenuity has been expended in answering that question which at the first flush seems comparatively simple. Broadly speaking, any question as to whether a trade is exercised here or not in this sort of case boils down to this: "Aye" or "No," do you find that the contracts that are alleged to constitute trade are signed here? Some years ago a matter that was frequently litigated in the courts as to the liability of a non-resident who is alleged to trade through an agent was whether the contracts were signed in this country. Once that became known, a non-resident who wanted to escape tax took the simple precaution of not having his contracts made in this country, and consequently, from the point of view of the Revenue, the whole thing has really come practically to nothing. We get singularly little except that we seem to earn a very considerable amount of bad will, because foreign countries point to us as taxing non-residents, and use the fact as a ground for taxing British subjects in their own country and singling them out for specially harsh treatment in the way of taxation.
11.0 p.m.
There is an old controversy between the Continental point of view and ours as to where the profit arises. The position has led to this; that a very representative body of traders in this country, such, for instance, as the Federation of British Industries, The British National Committee of International Chambers of Commerce and the Manufacturers' Agents' Association have made representations to the effect that this unsatisfactory state of things should be stopped. They have pointed out that they are penalised abroad by reason of the existing state of affairs and they have asked whether it is not possible
to endeavour to enter into some kind of reciprocal arrangement with foreign countries. The Committee will remember that that has been done already in the case of shipping contracts, to give an illustration of the possibilities of reciprocal arrangements. Therefore, in response to the right hon. Gentleman the Member for Epping (Mr. Churchill), I would say that our object in this Clause is to make it possible for us to enter into reciprocal arrangements in this sort of cases. We do not propose under this Clause to take power to exempt from taxation non-residents who have, for instance, a regular branch over here. It is obvious that it would be unfair that they should escape taxation while our people over here have to pay it. Equally, if you get a non-resident who is definitely selling stock here, we do not propose to exempt him or her from the obligation of paying tax. Also in the case of the manufacturer who has a definite regular agent over here carrying on business, we do not propose to exempt him from liability to Income Tax. What we propose to do in the rather shadowy and vague sort of case is to take power to sweep them away. I hope that with that explanation the Committee will allow us to have the Clause.

Sir D. HERBERT: I beg to move, in page 14, line 3, to leave out the words "from the sale of goods."
I have nothing but respectful commendation for all the Attorney-General has said and for the object of this Clause, but there are one or two points of detail which, I think, may properly be the subject of Amendment on the Report stage as the result of further consideration which has not yet been given to this Clause by, for instance, the London Chamber of Commerce. In moving this Amendment, I hope that I may only be asking for something which will be agreed to. This Clause proposes to enable reciprocal arrangements to be made between countries for dealing with these foreign agents. The foreign agents for the sale of goods are, I think, a comparatively small number of the foreign agents who are concerned. The Attorney-General referred to shipping contracts, but there is a number of other contracts of one kind and another in addition to those connected to the sale of goods. I cannot suppose that there is any particular reason why they should not be included.
I hope, therefore, the Committee will agree to leave out these particular words so that the Clause may apply to dealing with profits or gains arising directly or indirectly to a person resident in any foreign State or in the Dominions outside this kingdom, through an agency in the United Kingdom, whether that agency is one dealing strictly with the sales and the purchases of goods, or whether it is an agency dealing with many other matters of commerce—matters of finance and contracts of different kinds. I am so persuaded that this Amendment is entirely in accordance with the ideas of the Government and the promoters of this Clause, that I do not propose to labour the matter any further. I hope that the Amendment will be accepted or that we shall be told what are the objections.

Mr. P. SNOWDEN: As far as I understand the purpose of this Amendment, it is to extend the conditions under which an agent will be liable for tax in this country. This Clause has been drafted in consultation with, and as a result of, representations by the commercial interests and certain foreign countries, and the main purpose of the Clause is to try to bring about a reciprocal arrangement between this country and foreign countries and the Dominions. Therefore, I think the Committee will realise that there has been something of an understanding that reciprocal arrangements should be negotiated, and it would be very difficult to accept an Amendment which would change that understanding and make it impossible for us to come to some agreement. I gather that it is rather doubtful whether the commercial interests of this country, who have approved the proposal as it has been submitted, would be willing to agree to the extension which the Amendment would make. I will do as I have promised to do in regard to other Amendments, but I doubt very much whether, even if it were considered to be desirable, it would be possible to do anything this year. We will, however, bear it in mind and if, after consultation with the parties with whom we have had consultation, it is considered that it might be desirable to extend it in the direction indicated, it might be considered in next year's Finance Bill.

Sir L. WORTHINGTON-EVANS: In drafting this Clause, has the right hon. Gentleman consulted the representatives of the professional classes and professional organisations? "The sale of goods" limits the Clause to the trading classes and excludes the professional classes. There are professional classes who have agencies not only in this country, but also abroad. If the right hon. Gentleman is making reciprocal arrangements, why not cover them?

Mr. SNOWDEN: It did not occur to me to consider the cases that the right hon. Gentleman has in mind. I suppose he refers to accountants and the like. Such professional businesses would not be agencies but branches and would be taxed as resident concerns.

Mr. CHURCHILL: I do not rise to take part in the discussion but to ask, on a question of procedure, whether it would not be for the convenience of the Committee to allow the discussion on this Amendment to be general? Several hon. Members desire to speak on the Clause as a whole, and it would be desirable if you allowed the usual latitude.

Mr. SNOWDEN: If the Amendment were withdrawn and other Amendments not moved, we could at once pass to the discussion of the Clause on the Motion that it should stand part of the Bill.

Mr. CHURCHILL: I am not sure about that, as some of the hon. Members belonging to the Liberal party might have something to say.

The CHAIRMAN: I think the suggestion of the right hon. Gentleman is one which we might accept.

Dr. BURGIN: I wish to second the Amendment. We are grateful for the explanation given by the Attorney-General and the Chancellor of the Exchequer of the purport and meaning of this Clause, and as a true Liberal I am enormously influenced by the fact that it has something to do with an international conference. I am not quite sure that the Chancellor of the Exchequer is correct when he suggests that the Amendment has the effect of extending the liability of an agent to tax. It has exactly the contrary effect. The idea of the Amendment is to render the whole of the agencies capable of sharing in the benefit which the Clause is intended to grant,
rather than limiting it to the case of those who engage in the sale of goods. I have had occasion to address observations to the Committee before upon one other aspect of the taxing of agents of foreign principals in this country. The Attorney-General said that we accumulated bad will through this process, but we also do this—we put the English agent out of his job.
In Luton there is a large number of agents of foreign houses who, immediately the tax collector brings any paper to them, lose their job, and the foreign agent buys direct, so that we accumulate bad will and also put our own people out of employment. That is a serious matter. Here is a suggestion that where, under certain circumstances, there is double taxation, a menace to our trading enterprises with which we have to contend in many forms, there should be certain measures of relief, but we are surprised to find that this Clause is limited to agencies for the sale of goods.
A very large number of agencies are exactly the reverse and are for the purchase of goods, and a very large number of houses in certain parts of our city are concerned as regular buying agents. I understood the Attorney-General to say that this Clause was not intended to cover the case of anybody who had a regular business here, a part of which business was in fact an agency. I should be prepared to subscribe to that and allow such a business to be continued to taxation in the ordinary way, but I should have thought that agencies which dealt with the purchase of goods, with insurance matters, with various banking and broking matters such as are constantly found in this country from the Scandinavian and Netherland countries, were clearly within the ambit of what this international conference was intended to arrive at.
We submit that this Clause is an excellent beginning. Any attempt to deal with the difficulty of double taxation is worthy of the greatest support in this Committee. It is one of the contributory causes of unemployment and lack of initiative. I support the whole of this Clause, but I ask that its ambit should not be limited to those who derive their profits from the sale of goods but should be extended to other cases. The law is that the foreign principal is responsible
through his agent as there is sale for the consigned stock or the agent is capable of signing a contract in this country. A large volume of business relates to sale of goods, but it does not cover the whole story and it is because the Clause is unnecessarily limited that the Amendment is moved. We desire to raise the point. I have no doubt that the hon. Member who has moved the Amendment will be prepared to accept an assurance that the Government will carefully look into the matter between now and Report. I have had a large number of communications on this matter; it is not an academic point raised by me. It is felt by the trade concerned. This Clause is an excellent beginning but it is unduly restricted to an agency for the purchase of goods whereas it should include the sale of goods as well.

Lieut.-Colonel Sir A. LAMBERT WARD: I congratulate the Chancellor on having made this beginning, but it is only a beginning. It does not go far enough. The idea that you can tax foreigners as long as they are in this country is old fashioned and should have been exploded long ago. In reply to an interrupt ion of mine the Attorney-General said that we make people who have business in this country liable to Income-tax, and when I asked how it was got, the hon. and learned Member replied "through the agents". How much was got he did not say and it seems to me that in attempting to get at the principal through the agent we are doing a vast amount of harm, in an unnecessarily unprofitable way because the amount we get is so small as to be hardly worth while disturbing our friendly commercial relations with foreign countries. The Attorney-General did not say to what extent we attempted to make the agent responsible. Is it on imaginary profits or on the real profits which are supposed to be realised on goods sold in this country, or on the profits of the principal?
Let me give a specific case. A man wishes to buy a motor car and he goes to any agent in London or elsewhere. He wants a Studebaker, and unless the car is in stock he has to wait until a car is brought from the manufacturers in America. If there is a stock of the cars the agent is liable not only
for the profit which he himself makes upon the sale of that car but also for the supposed profits which the manufacturers themselves have made through the sale of it. In that case is the agent liable for the profits made on that particular car only or is he liable for Income Tax on the entire profits which the Studebaker Corporation may make? The other day I went into an ironmonger's shop to buy a shifting spanner. When I looked at the name on it I saw that it was made by the Hartford Tool Co. of Connecticut. It was sold out of stock, and came out of a cardboard box which contained about a dozen spanners. Is that ironmonger liable for the entire profits made by the Hartford Tool Co. of Connecticut or liable only for the amount of profit that the company made on that particular box of spanners? What chance has the Treasury of getting that profit?
Go into a greengrocer's shop and buy a pound of cherries imported from France. Is the greengrocer liable for the profits of the French grower of the cherries? If he is, he is either not going to pay it at all or the Treasury are going to drive him into the bankruptcy court. In either case it is not worth while. All that we are doing, in attempting to obtain Income Tax from nonresidents in this country through their agents, is creating ill-feeling and doing harm to our Continental and foreign trade, which at this moment we cannot really afford to do.
There is another Amendment on the Paper in my name to leave out the paragraph which deals with profits which
accrue to a person not resident in the United Kingdom directly or indirectly from the sale of goods effected in the United Kingdom through any branch or management in the United Kingdom or through any agency in the United Kingdom where the agent has and habitually exercises a general authority to negotiate and conclude contracts.
In that case it seems to me that if the agent does not sign definitely as a partner with the concern, but signs as an agent for the manufacturer or the merchant abroad, he ought not to be liable for the tax. If he is liable the question again arises, how are you going to collect the tax? You are either going to drive men out of business or into the bankruptcy court; or else you shut your eyes
to the fact that a man is tacitly ignoring the law. Again, take the case of the agents of merchants in the Argentine. Up to a few years ago they have habitually signed charters with English shipowners. To what extent are they liable, not only on the charter but also with regard to the profits which their principals may make in South America? Whatever the law may say you cannot get the money, for if you attempt to do so you merely drive the agents out of business or into the bankruptcy court. These attempts to get income tax out of non-resident merchants and traders are not workable.

Mr. CHURCHILL: I suggest that at this stage the Chancellor of the Exchequer should tell us that he will make an effort to deal with the words "the sale of goods," around which this discussion has played. The words clearly require further definition, both in the direction of amplification and precision. The hon. Member for Luton (Mr. Burgin), who spoke so ably from the Liberal benches, has shown why "the purchase of goods" should be included. I suggest that the Chancellor of the Exchequer or the learned Attorney-General should tell us that this point will be studied by the experts of the Treasury between now and Report, with a view to making the Clause the vehicle of the purposes of the Government.

The ATTORNEY-GENERAL: The Chancellor of the Exchequer authorises me to say, and I say so without hesitation, that as this is a matter of extreme complexity on which we are entitled to expect the help of the Committee, everything which the Committee has said will certainly be considered. At the same time I must point out that, plainly, profits are not made here by the purchase of goods, and in the case of an agent who is here purchasing only, there is no question of tax at all. The only tax is the remuneration which the agent gets. Profit does not come from purchasing but from selling. We shall consider all the points which have been raised, but I am afraid that it will be a long time before I am convinced that profit comes from purchasing.

Sir D. HERBERT: In view of what the Chancellor of the Exchequer and the Attorney-General have said I am
inclined, with the leave of the Committee, to withdraw the Amendment, but as the discussion has covered the whole Clause I may be permitted a few words before doing so. As to this Amendment am quite satisfied that the point can be dealt with on the Report Stage, but in regard to the remainder of the Clause there are, or may be, very difficult points of law requiring serious consideration particularly in relation to the proviso at the end of Sub-section (1). I do not think that those words can be as usefully discussed at this time of night, when we are all perhaps rather impatient to go home, as at a later stage. I say so with all the more reason because I have had an intimation from certain very important bodies in the City of London, that they have not had time to consider this Clause and that they feel somewhat uneasy as to how it may affect legislation passed some time ago in regard to foreign agents which may be made to the Chancellor in order to avoid complicating the law in relation to agents will receive attention, equally with the point raised in the Amendment. In the circumstances, I beg leave to withdraw the Amendment.

HON. MEMBERS: Agreed!

Mr. MAJORIBANKS: I wish to make it plain that there is one Gentleman at any rate on this side of the Committee who has not joined in the general chorus of approval. I think that the Committee ought to realise before passing this Clause, that an entirely new departure is being made in connection with the Income Tax laws of this country. We have had an Income Tax for about 130 years, but never until now has it been found necessary to give relief to foreigners who trade in this country. I think we were all re-assured by the observations of the learned Attorney-General when he said that relief was only to be given to traders who effected contracts outside this country, and was not going to apply to regular agencies. That reassured us a great deal. Then a speech came from my hon. Friend, the Member for Luton (Dr. Burgin) and another hon. Friend on these benches, and we were far from being reassured. We see the beginning of a dangerous wedge into our trading community. Every trader in the country
may well be affected by these Orders in Council. If any relief is to be given, it should be the business of Parliament and not the business of an Order-in-Council, which may or may not be put right later by Parliament. In Sub-section (2) Parliament may revoke any order,
but without prejudice to the validity of anything previously done thereunder.
It can only be intended to give relief to foreigners who trade in this country in competition with our own people. Take the case of America. We are assured that some reciprocal arrangements will be given, but have we got the best of America in the past? In the debt settlements, it is always Great Britain which has had to pay, and it will be unlikely that Great Britain will be able to get any reciprocal arrangements. In this country we have the finest system of jurisprudence in the world, and a foreigner can appeal again and again to our courts and get justice. We know that American courts are not as effective as ours, and would not be prejudiced in favour of British trade. The system can never be reciprocal, because the desire of America to capture our markets is far greater and out of all proportion to the desire of British traders to compete with American markets. It is said that the effect of this will be to bring American capital into this country which will employ British people; it will mean that we shall have many more American masters. We shall have, too, Russian masters, because this Clause is designed so that we can come to some arrangements with that strange republic in the north. Hon. Members have said that Russian trade was going to cause unemployment, and presumably they are going to put this into effect in some way. It would be childish to expect any protection from the courts of Russia to British traders in reciprocation for the advantage which they may get here. I wish to register my protest against this entirely new departure in the Income Tax legislation. It will defend the foreigners in competition with our own people.

Sir J. SANDEMAN ALLEN: I am sorry to have to disagree with the hon. Member for Eastbourne (Mr. Marjoribanks) but I do not think he knows what has been going on for some years past. The trading community have been working
for some time to get this business on a right basis. Already there are reciprocal arrangements about shipping; and, in that spirit of reciprocity, we have gradually been getting on to a basis which is as satisfactory as it can be under the circumstances. I do not suggest that this Clause covers all the points to be dealt with, and many members of the British trading community will be glad to learn that the Chancellor has agreed to consider this matter in order to see whether he can do more on the lines we have asked for. The hon. Member for Luton (Dr. Burgin) has, in the main, expressed what is in the minds of many of us. I was anxious that the House should not be under the impression that the state of affairs was quite as the hon. Member for Eastbourne described it, although I am not disputing all that he said. The Clause is satisfactory up to a point, but we want to see it developed and while we do not feel that we have got all we want in the interests of the country we do appreciate it as a step in advance and hope the Chancellor will see his way to put matters on a still better foundation.

Major NATHAN: Not for the first time in the course of these Debates I find myself in disagreement with my hon. Friend the Member for Eastbourne (Mr. Marjoribanks) on a question regarding the practical applications of the provisions of the various Finance Acts and of the Bill before us to-day to the humdrum business affairs of every day life. This Clause has been long needed in our financial legislation. I think the Attorney-General will confirm me in the statement that my hon. Friend was quite wrong in suggesting that a fundamentally new principle of law is introduced by the Clause. As a matter of fact it is merely a restoration of the law as it was until a, very few years ago—I think about the year 1913. Then, for the first time in the income tax law of this country, foreign principals were liable to be charged to income tax in the name of resident agents, factors and the rest. As I understand it, this Clause is the result of international discussions which have been going on over a long period of years and have only been brought to fruition by the intervention of some of those bodies to which the Chancellor of the Exchequer or the Attorney-General referred a few
moments ago. These provisions have attracted the support of a number of foreign governments who are vitally concerned to see that trade between this country and their countries should be extended and improved.
I do not know whether those who are opposing this Clause realise what happens when a foreign manufacturer or merchant wishes to start business in this country. The first thing he does is to go to his accountant or solicitor and ask "What is my liability to income tax going to be, and how can I so arrange things as not to incur that liability?" The result has been that very little tax has been collected under these provisions, but that a great deal of friction has been engendered and a good many businesses which might have been opened here have never been started. Instead, the foreign manufacturer or merchant has sent a traveller or has done that business by correspondence. Instead, therefore, of these provisions operating to take work away from those carrying on business in this country, the first effect of them will be to increase the number of those who are employed as agents or in the employ of agents. I am not quite sure whether I correctly understood the Chancellor of the Exchequer to say that the object of this Clause was to extend the liability to taxation. If that is so, I think he was mistaken. I see that the right hon. Gentleman agrees that that is not so, and that the purpose and effect of the Clause is to limit the area of taxation. I am much obliged to him, and will not pursue the matter further.

Amendment negatived.

Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.—[Mr. P. Snowden.]

Committee report Progress; to sit again upon Tuesday, 17th June.

Orders of the Day — ROAD TRAFFIC BILL [Lords]

(CONSOLIDATED FROM ROAD TRAFFIC BILL [Lords] AND OMNIBUSES BILL).

Order for Consideration (as amended in the Standing Committee), read.

Mr. SPEAKER: With regard to this Bill, I have to call the attention of the House to the fact that the Standing Committee on the Bill by inadvertence during the consideration of a new Clause, agreed to an Amendment authorising the payment of certain fines into the Exchequer for which they had no authority under the Financial Resolution of the House, and it will, therefore, be necessary to re-commit the Bill.

Ordered, "That the Bill be re-committed to the former Committee in respect of the Clause (Application of fines and fees under Part I.)"—[Mr. T. Kennedy.]

The remaining Orders were read, and postponed.

It being after Half-past Eleven of the Clock, Mr. SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.

Adjourned at Thirteen Minutes before Twelve o'Clock.